Stand-off over as new talks launched
10 March 2008
Published in
Inform
issue #65
See the full issue here.
Normal levels of gas supply were restored to Ukraine by the Russian state gas company, Gazprom, after its CEO, Alexi Miller, reached a settlement with Oleh Dubyna, CEO of Ukraine’s Naftohaz Ukrainy.
Prior to the agreement, Gazprom reduced the level of gas supplied to Ukraine by 25 percent last Monday and a further 25 percent on Wednesday. The resumption of supply was reached as fears grew that gas supplies to Europe would be impacted. Western European countries are reliant on a quarter of their gas imports from Gazprom with 80 percent flowing through Naftohaz’s pipelines.
“It was a game of brinkmanship and the Kremlin blinked first,” was how Christopher Weafer, an analyst with Moscow’s Uralsib investment bank, described the stand-off.
According to a government statement, “The parties reached agreement that gas deliveries from January 1 to March 1, 2008 will be fully registered and repaid by Naftohaz of Ukraine according to the pattern effective by the beginning of the year.”
Prime Minister Yulia Tymoshenko said, “I am very glad that Ukraine held out in this very complicated confrontation and has not gone back a step in key issues of national security.”
The dispute centred upon a $600 million unpaid gas bill and the lack of a contract governing gas consumed in 2008.
This week Naftohaz will resume meetings with Gazprom officials to hammer out a deal.
See the full issue here.
Normal levels of gas supply were restored to Ukraine by the Russian state gas company, Gazprom, after its CEO, Alexi Miller, reached a settlement with Oleh Dubyna, CEO of Ukraine’s Naftohaz Ukrainy.
Prior to the agreement, Gazprom reduced the level of gas supplied to Ukraine by 25 percent last Monday and a further 25 percent on Wednesday. The resumption of supply was reached as fears grew that gas supplies to Europe would be impacted. Western European countries are reliant on a quarter of their gas imports from Gazprom with 80 percent flowing through Naftohaz’s pipelines.
“It was a game of brinkmanship and the Kremlin blinked first,” was how Christopher Weafer, an analyst with Moscow’s Uralsib investment bank, described the stand-off.
According to a government statement, “The parties reached agreement that gas deliveries from January 1 to March 1, 2008 will be fully registered and repaid by Naftohaz of Ukraine according to the pattern effective by the beginning of the year.”
Prime Minister Yulia Tymoshenko said, “I am very glad that Ukraine held out in this very complicated confrontation and has not gone back a step in key issues of national security.”
The dispute centred upon a $600 million unpaid gas bill and the lack of a contract governing gas consumed in 2008.
This week Naftohaz will resume meetings with Gazprom officials to hammer out a deal.
Major Sticking Point
On 12 February, Russian Federation President Vladimir Putin met with Ukrainian President Viktor Yushchenko in Moscow. The leaders agreed to establish two 50:50 ventures between Gazprom and Naftohaz for the import of Central Asian and Russian gas to Ukraine and for its onward sale inside the country.
The proposed replacement of intermediary companies RosUkrEnergo and UkrGazEnergo by the two new joint venture companies was rejected by Ms Tymoshenko, who has long campaigned against the need for any intermediaries in brokering gas supply agreements. Such companies are believed by many to be vehicles for siphoning off money into private pockets.
"The cabinet cannot agree with parts of the accord,” read a letter from Ms Tymoshenko, “notably the replacement of one intermediary by another."
According to Ms Tymoshenko, Naftohaz aims to sign a direct contract with Gazprom Export, which holds contracts with Kazakhstan, Turkmenistan and Uzbekistan for the purchase of Central Asian gas.
“Our goal is for Naftohaz to contract for gas directly,” said Ms Tymoshenko, who advocates long-term supply contracts for Ukraine. “We should put an end to the tradition of short-term contracts for several months. I consider that long-term contracts are what both the Ukrainian and Russian sides need."
The prime minister’s uncompromising stance drew criticism from President Viktor Yushchenko who favours the new joint ventures.
While the Russians have agreed to the removal of RosUkrEnergo, the main interest of Gazprom is believed to be the partial control of Ukraine’s domestic gas supply market and gas transit network.
Roman Kupchinsky, an energy analyst quoted by Radio Free Europe/Radio Liberty, said, "The intermediaries are not in Russia's interest either, as a country Russia
loses taxes because of intermediaries, it gives away money for no good reason to intermediaries… Gazprom wants to get into the Ukrainian domestic market, it wants 50 percent of the market."
Recognising the importance of domestic distribution and the strategic value of Ukraine’s international gas transportation network, Ms Tymoshenko claimed the February
deal would only "preserve corrupt schemes and abuses, and lead to the bankruptcy of Naftohaz and so contradict national interests."
While last week was an undoubted success for Ms Tymoshenko, she was quick to play down what looks like a psychological victory and which Kommersant called "the first failure of Gazprom's foreign policy."
“This is not Ukraine vs. Russia, it’s not about scoring political points. It’s about finding common ground and reaching a transparent commercial agreement that will normalise our gas relations. I trust that we will have calm and balanced negotiations and will find a common will to achieve this goal,” said Ms Tymoshenko.
On 12 February, Russian Federation President Vladimir Putin met with Ukrainian President Viktor Yushchenko in Moscow. The leaders agreed to establish two 50:50 ventures between Gazprom and Naftohaz for the import of Central Asian and Russian gas to Ukraine and for its onward sale inside the country.
The proposed replacement of intermediary companies RosUkrEnergo and UkrGazEnergo by the two new joint venture companies was rejected by Ms Tymoshenko, who has long campaigned against the need for any intermediaries in brokering gas supply agreements. Such companies are believed by many to be vehicles for siphoning off money into private pockets.
"The cabinet cannot agree with parts of the accord,” read a letter from Ms Tymoshenko, “notably the replacement of one intermediary by another."
According to Ms Tymoshenko, Naftohaz aims to sign a direct contract with Gazprom Export, which holds contracts with Kazakhstan, Turkmenistan and Uzbekistan for the purchase of Central Asian gas.
“Our goal is for Naftohaz to contract for gas directly,” said Ms Tymoshenko, who advocates long-term supply contracts for Ukraine. “We should put an end to the tradition of short-term contracts for several months. I consider that long-term contracts are what both the Ukrainian and Russian sides need."
The prime minister’s uncompromising stance drew criticism from President Viktor Yushchenko who favours the new joint ventures.
While the Russians have agreed to the removal of RosUkrEnergo, the main interest of Gazprom is believed to be the partial control of Ukraine’s domestic gas supply market and gas transit network.
Roman Kupchinsky, an energy analyst quoted by Radio Free Europe/Radio Liberty, said, "The intermediaries are not in Russia's interest either, as a country Russia
loses taxes because of intermediaries, it gives away money for no good reason to intermediaries… Gazprom wants to get into the Ukrainian domestic market, it wants 50 percent of the market."
Recognising the importance of domestic distribution and the strategic value of Ukraine’s international gas transportation network, Ms Tymoshenko claimed the February
deal would only "preserve corrupt schemes and abuses, and lead to the bankruptcy of Naftohaz and so contradict national interests."
While last week was an undoubted success for Ms Tymoshenko, she was quick to play down what looks like a psychological victory and which Kommersant called "the first failure of Gazprom's foreign policy."
“This is not Ukraine vs. Russia, it’s not about scoring political points. It’s about finding common ground and reaching a transparent commercial agreement that will normalise our gas relations. I trust that we will have calm and balanced negotiations and will find a common will to achieve this goal,” said Ms Tymoshenko.