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Thu, Jan 05, 2006 - Page 12 News List

Gas price row settled after talks

DONE DEAL Russian and Ukrainian officials reached a settlement on gas prices in a deal that will effectively double the price of the gas Ukraine receives from Russia


The Russian and Ukrainian natural gas companies agreed yesterday to resume gas shipments to Ukraine under a complex price scheme in which OAO Gazprom will sell gas to a trading company for US$230 per 1,000m3 and Ukraine will buy gas from the company for US$95.

The heads of the two state-controlled companies, Gazprom and Naftogaz, announced the conclusion of a five-year contract at a joint news conference in Moscow.

"The talks ended successfully for Gazprom and Gazprom is completely satisfied," Gazprom chief Alexei Miller said, signaling an end to the furious dispute that had engulfed not only the two companies but the Russian and Ukrainian governments and threatened long-term repercussions in Europe as well.

Europe gets about a quarter of its gas from Russia, some 80 percent of that amount coming in pipelines that cross Ukraine. Russia stopped selling natural gas to the neighboring country of 48 million on Sunday as their price dispute reached a climax, and European customers reported a sharp falloff of gas supplies on Monday.

The energy trading company, Rosukrenergo, which is jointly owned by Gazprom bank and a Swiss subsidiary of Austria's Raiffeisen Bank, can charge differing prices to Ukraine because it receives gas from Turkmenistan as well, said Gazprom spokesman Sergei Kupriyanov. Ukraine buys gas from the Central Asian nation for a significantly lower price.

Kupriyanov said that the agreed price was US$230 as of Jan. 1 but that it would fluctuate with the market. He did not indicate how often the price would be adjusted.

Naftogaz chief Oleksiy Ivchenko said that the two companies had also agreed to raise the transit fee Gazprom pays to send its gas through Ukrainian pipelines from US$1.09 to US$1.60 per 1,000m3 to travel 100km -- a 47 percent increase.

"We are satisfied with the talks, we reached a broad-based agreement on mutually acceptable terms," he said. "Our relationship is shifting completely to a market basis."

After a wave of criticism from Europe, Russia boosted the amount going into Ukrainian pipelines late on Monday and supplies in Europe appeared to be returning to normal on Tuesday. It continued to accuse Ukraine of siphoning off gas intended for Europe, but Naftogaz said it was using only Turkmen gas as of Sunday. Gazprom had said Ukraine had not yet received any Turkmen gas this year.

A meeting of representatives of EU member states and the gas industry was scheduled later yesterday in Brussels to discuss how they would react to the crisis and deal with future threats to Europe's gas supply.

US$230 is the price Gazprom had demanded that Kiev pay -- a more-than-fourfold increase over last year's price -- and Ukraine had resisted mightily, saying that while it favored paying market prices it needed them phased in over a transition period of several years. Talks broke down late last week amid a barrage of accusations of blackmail, sabotage and thievery.

Russia last year supplied about a third of the gas consumed in Ukraine.

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