Ukraine Sets Conditions For Paying Natural Gas Bill

KIEV, Ukraine -- Ukraine is willing to settle its debts with the Russian natural gas monopoly Gazprom, provided it can have a direct import agreement with Gazprom, the first deputy prime minister of Ukraine, Oleksandr Turchynov, said Sunday.

Ukraine's First Deputy Prime Minister, Oleksandr Turchynov.
Gazprom has threatened to cut some natural gas supplies to Ukraine if the Ukrainian state energy company, Naftogaz, does not pay a debt of $1.5 billion by Monday.

The new Ukrainian government under Yulia Tymoshenko wants to get rid of supply intermediaries, especially RosUkrEnergo, a commodity trader registered in Switzerland that is partly owned by Gazprom.

Ukraine says that the existence of the intermediaries raises import prices of natural gas and that their operations are opaque and vulnerable to corruption.

"The first deputy prime minister confirms that Naftogaz indeed has debts," said a statement on the Ukrainian government's Web site.

"Naftogaz is ready to commit to full repayment of its debt in exchange for an agreement to sign a direct contract and relevant documents with Russia's Gazprom," it said.

Gazprom supplies Ukraine with natural gas that it buys from Turkmenistan and other Central Asian countries through RosUkrEnergo. The trading company is half-owned by Gazprom and half by two Ukrainian businessmen.

Both Russia and Ukraine have assured Europe - which receives a quarter of its natural gas from Russia, most of it via Ukraine - that the latest disagreement would not disrupt westward natural gas flows.

The dispute "will have no consequences for other consumers of our gas or Central Asian gas," the Russian first deputy prime minister, Sergei Ivanov, told a news conference in Munich, where he was attending an international security conference. "If you pay for the gas, then you'll get it."

A disagreement over the price of Russian natural gas imports led to a brief supply cut at the start of 2006, which affected some European countries, but a similar dispute over debts last October was resolved without affecting supplies.

Ivanov said that Central Asian nations, which have experienced an unusually cold winter, had been unable to supply Ukraine with all its natural gas needs and that Gazprom had stepped in to help a "brotherly" country.

Ukraine accepted Gazprom's offer and agreed to pay on monthly basis, he said, but the payments had not been received so Russia had withdrawn the offer.

"We are not doing billions of dollars charity anymore," Ivanov said.

The latest dispute burst as the Ukrainian president, Viktor Yushchenko, was set to visit Moscow on Tuesday and weeks before Tymoshenko was scheduled to visit Russia. Both are expected to talk about natural gas agreements.

Tymoshenko has long accused the energy sector of corrupt practices and Moscow of politicizing energy issues. Besides abolishing the intermediaries, she also wants to raise the price Russia pays for transit through Ukrainian territory.

A Gazprom spokesman said Friday that Russian supplies to Ukraine could be cut off as early as Tuesday morning if the debts were not settled.

Source: International Herald Tribune