FT Interview with
Hryhoriy Nemyria
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YULIA TYMOSHENKO
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Gas Deal Signed With Russia
20 January 2009
Published in
Inform
issue #100
See the full issue here.
Prime Minister Yulia Tymoshenko and her Russian counterpart Vladimir Putin, were present in Moscow to witness Gazprom and Naftohaz sign a ten year contract that brings an end to the gas dispute. Following signature of the contracts, instructions were given to resume gas flows to Europe.
The basis of the deal, agreed over the weekend, involves Ukraine paying 20 percent less than the European market price for gas in 2009. In return, the existing discounted tariff Gazprom pays for its gas to be transported through Ukraine’s pipeline system to Europe will remain in place until the end of the year. On 1 January 2010, both countries will then pay European market prices for gas supply and transit respectively.
See the full issue here.
Prime Minister Yulia Tymoshenko and her Russian counterpart Vladimir Putin, were present in Moscow to witness Gazprom and Naftohaz sign a ten year contract that brings an end to the gas dispute. Following signature of the contracts, instructions were given to resume gas flows to Europe.
The basis of the deal, agreed over the weekend, involves Ukraine paying 20 percent less than the European market price for gas in 2009. In return, the existing discounted tariff Gazprom pays for its gas to be transported through Ukraine’s pipeline system to Europe will remain in place until the end of the year. On 1 January 2010, both countries will then pay European market prices for gas supply and transit respectively.
Ms Tymoshenko described the agreement as “historic”
and said that Europe would receive supplies “as
soon as the gas passes through our pipelines. There
won’t be any delay.” She also took time to call
José Manuel Barroso, the President of the European
Commission, whom she thanked for the EU’s
assistance in helping to resolve the dispute.
In 2008, Ukraine paid $179.50 per thousand cubic metres of gas, which is slightly less than half the current market price for European countries. Under the new contract Ukraine is likely to pay less than $250 per thousand cubic metres. A higher rate will be paid in the first quarter but this will decrease as the price of gas catches up with the price of oil. The latter has plummeted from about $147 in July to as low as $35 a barrel today.
Supply contracts for natural gas tend to be lengthier than oil contracts and, typically, gas prices lag behind oil prices by six to seven months. According to Ronald Smith, a strategist at Alfa Bank, by midsummer Ukraine could be paying as little as $150 per thousand cubic metres.
EU officials welcomed the contract signature, sounding a cautiously optimistic tone. “The proof of the pudding is in the eating and the proof of the gas is in the flowing,” remarked Johannes Laitenberger, a European Commission spokesperson.
The new deal also removes intermediaries from the supply of natural gas to Ukraine; something Prime Minister Tymoshenko has long campaigned for. The agreement also maintains Ukraine’s sovereignty over its gas transit system, which is a prized national asset that has long been coveted by Gazprom. Ukraine transports about one-fifth of the EU’s gas supplies.
The eventual move to European market prices should benefit both countries. A major benefit for Ukraine is that Russia will no longer be able to use its energy card to exert influence over Kyiv.
“We seek to develop closer energy ties to Europe,” said Hryhoriy Nemyria, Deputy Prime Minister responsible European integration, “energy security, transparency and stability of supply are fundamental tenets underpinning future energy cooperation.”
Securing a deal to end the dispute was a coup for Ms Tymoshenko. “Ukraine’s prime minister has again affirmed her pragmatic approach in terms of dealing with Russia,” said Tim Ash, a senior emerging markets banker for the Royal Bank of Scotland.
In 2008, Ukraine paid $179.50 per thousand cubic metres of gas, which is slightly less than half the current market price for European countries. Under the new contract Ukraine is likely to pay less than $250 per thousand cubic metres. A higher rate will be paid in the first quarter but this will decrease as the price of gas catches up with the price of oil. The latter has plummeted from about $147 in July to as low as $35 a barrel today.
Supply contracts for natural gas tend to be lengthier than oil contracts and, typically, gas prices lag behind oil prices by six to seven months. According to Ronald Smith, a strategist at Alfa Bank, by midsummer Ukraine could be paying as little as $150 per thousand cubic metres.
EU officials welcomed the contract signature, sounding a cautiously optimistic tone. “The proof of the pudding is in the eating and the proof of the gas is in the flowing,” remarked Johannes Laitenberger, a European Commission spokesperson.
The new deal also removes intermediaries from the supply of natural gas to Ukraine; something Prime Minister Tymoshenko has long campaigned for. The agreement also maintains Ukraine’s sovereignty over its gas transit system, which is a prized national asset that has long been coveted by Gazprom. Ukraine transports about one-fifth of the EU’s gas supplies.
The eventual move to European market prices should benefit both countries. A major benefit for Ukraine is that Russia will no longer be able to use its energy card to exert influence over Kyiv.
“We seek to develop closer energy ties to Europe,” said Hryhoriy Nemyria, Deputy Prime Minister responsible European integration, “energy security, transparency and stability of supply are fundamental tenets underpinning future energy cooperation.”
Securing a deal to end the dispute was a coup for Ms Tymoshenko. “Ukraine’s prime minister has again affirmed her pragmatic approach in terms of dealing with Russia,” said Tim Ash, a senior emerging markets banker for the Royal Bank of Scotland.