Sat, Feb 16, 2008 - Page 9 News List

Tortuous and tangled is the Russian gas route to the EU

Wrangling between Ukraine and Russia over gas prices is likely to continue, which does not bode well for the euro zone

By Stefan Korshak  /  DPA , KIEV

Beginning in October Tymoshenko, using a variety of pretexts, stopped Ukrainian government transactions with the companies.

Gazprom, owning as it does a 50-percent stake in both highly profitable intermediary firms, has been less than enthusiastic, its executives pointing out a contract is a contract and adding that Ukraine already has run up a US$1.5 billion debt to the firms, of which exactly half is lost Gazprom income.

The Kremlin has employed its own pressure tactics as well, arguing that since Ukraine stopped paying the intermediaries in October and continued to import gas, Kiev was consuming fuel directly from Gazprom at a current US$300 per 1,000m3, rather than the US$189 via the middleman companies as per the early 2006 contract.

Ukrainian energy official Ihor Didenko, in Monday remarks to the Ukrainska Pravda magazine, floated the Ukrainian riposte: The gas that Gazprom -- a product buyer in Central Asia -- is selling to Ukraine these days is not US$300 Russian gas, but rather US$65 Central Asian gas, imported by Gazprom specifically for the Ukrainian market.

Industry experts predicted an eventual agreement that would avert the present crisis, but do little to place Russo-Ukrainian gas relations in a stable contractual relationship.

"They'll solve this crisis," Makhno said. "But for sure it's not the last one."

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