Russia: no compromise in demand that Ukraine quadruple payments for natural gas
MOSCOW – Russia on Tuesday denied reports that it was ready to compromise on demands that Ukraine pay four times as much for Russian gas, a dispute that threatens to cut off about a third of the gas that Ukraine relies on for heat and industry.The denial, made by Russian energy minister Viktor Khristenko, came hours after Ukraine’s energy minister claimed that a compromise had been reached in the politically charged dispute. Ukraine’s relations with the Kremlin have been stiff since Ukrainian President Viktor Yushchenko came to power in January on a platform of moving Ukraine into closer integration with the West.President Vladimir Putin and Yushchenko spoke by telephone Tuesday evening about the brewing crisis, Yushchenko’s office said. Ukraine’s energy minister is to come to Moscow on Wednesday for talks, the president’s office said.About a third of Ukraine’s natural gas comes from Russia and Ukrainian officials say jacking the price up from the current $50 per 1,000 cubic meters could cripple Ukraine’s energy-intensive heavy industry and impede the country’s efforts to boost its economy. Russia’s state-controlled Gazprom gas monopoly argues that Ukraine should pay $220-$230, more in line with world prices and portrays the demand as putting the gas sphere in line with market-economy demands.In the United States, natural gas futures traded near $11 per 1,000 cubic feet Tuesday on the New York Mercantile Exchange.Ukraine, a country of 48 million, doesn’t argue with the market-economy theory and Yushchenko’s office said he told Putin Tuesday that he supports price liberalization. But Ukraine wants the price increases to be phased in over a period of five years.However, Khristenko, in remarks shown on state-controlled Channel One television, said “no other offers will be made.”Gazprom says it is prepared to shut off gas to Ukraine on Jan. 1 if an agreement isn’t reached. Officials in both countries have raised the prospect of sending the issue to the Arbitration Institute in Stockholm, Sweden, which both sides recognize as a neutral body for resolving trade disputes. But the institute cannot undertake the case unless both parties request it.Earlier Tuesday, Ukrainian Energy Minister Ivan Plachkov said at a round-table discussion that an agreement had been reached for a gradual phase-in of gas price increases, his spokeswoman Lilya Klochko said. However, a Gazprom spokesman quickly denied that any agreement had been reached and Plachkov’s office could not be reached later for clarification.Despite Russia’s arguments that market forces demand the price increase, Gazprom is charging significantly less to some ex-Soviet countries. On Tuesday, the company reached agreement to sell gas to Belarus for $46.68 (about euro37) per 1,000 cubic meters – just 20 percent of what it wants Ukraine to pay. Belarus is closely allied to Moscow.The Russia-Ukraine dispute also has raised concerns about gas supplies to Europe – about half the natural gas consumed in the European Union comes from Gazprom and most of that is shipped in pipelines that cross Ukraine.On Tuesday, Ukrainian Prime Minister Yuriy Yekhanurov claimed Ukraine has the right to take 15 percent of the Europe-bound gas shipments that cross Ukraine.Ukrainian companies “have the legal right to take 150 cubic meters of gas from every 1,000 as a transit fee” under the contract with Gazprom, he said in comments released by his office.Sergei Kuprianov, a Gazprom spokesman, called the claim “legally illiterate” and Khristenko said “there cannot be talk of 15 percent, or 10 percent or 2 percent.”Ukraine uses almost 80 billion cubic meters (312 billion cubic feet) of gas annually, receiving 25 billion cubic meters from Russia, and 36 billion cubic meters from Turkmenistan, pumped via Russia. Ukraine itself produces some 18 billion cubic meters.Plachkov said that Ukraine and Turkmenistan have signed a deal on gas imports, but declined to announce the price. News reports said Yushchenko will announce prices for the Turkmen gas in his New Year’s address to the nation.Natural gas is one of the key export commodities for Russia, whose economy heavily depends on exports of natural resources.As the price dispute intensified, Ukrainian officials began suggesting that the country hike the rent it charges Moscow for the Russian Navy’s Black Sea Fleet facilities in Ukraine. The port in Sevastopol provides the Russian navy its only convenient access to the Mediterranean.Russian Defense Minister Sergei Ivanov sharply warned Tuesday that any rent increase could have “fatal” consequences. But his Ukrainian counterpart Anatoliy Grytsenko said no rent hike would be made unilaterally.