Prime Ministers put on smiles to fend off new gas dispute
Published: 20 November, 2009, 10:39
Edited: 23 November, 2009, 22:53
TAGS: Crisis, Russia and the global economy, Big deal, Gas
This New Year’s Eve will not be clouded by gas cuts, says an optimistic Vladimir Putin after meeting with Ukrainian counterpart Yulia Timoshenko in Yalta on Thursday.
Stiff smiles and strained relations. The Prime ministers of Russia and Ukraine met in Yalta for talks on gas cooperation – something which has been hard to come by recently.
There will be no sanctions imposed on Ukraine due to the new, lower volumes for the year 2010. Also all the discounts that both sides enjoyed this year will be cancelled, according to Vladimir Putin.
“We agreed on this right away and informed everyone about this – Ukraine kept last year’s level of gas transit and we made a 20% discount, from the European gas price. Next year there will be no discounts and no benefits for gas transits. The price for the gas transit will be more than the gas price itself”.
But ever the diplomat, Yulia Timoshenko explains Russia and Ukraine have no disagreements. Everything, she says, is proceeding according to the contract signed in January 2009, which sets the volumes and transit conditions.
“This year we reached a long-term contract on Russian gas supplies to Ukraine and to Europe via Ukraine until the year 2019. It was a breakthrough in our relations in the gas sector and both countries are complying with that agreement. It is very important that Russia, as the stronger country, is making concessions for Ukraine and bears in mind the crisis situation”.
Ukraine’s President Victor Yushchenko disagrees. In a letter to Dmitry Medvedev he complains that Ukraine is struggling with paying high prices for gas, while only getting a small sum in transit fees.
Ukraine’s political climate may be about to change with January's Presidential election. But, for the time being, Yushchenko is doing his best to make the gas transit issue a key issue in the battle for votes.
From the new year, transit fees are due to be calculated according to a new formula, which both sides have long since agreed to. Aleksandr Morozov – HSBC, chief economist says this makes it a political football in Ukraine.
“According to the formula based on the past levels of gas there are likely to see a hike in gas transit fees. The difference will be 50-60%. As far as Prime Minister's office is concerned, they are quite happy with what's written in the contract – indeed it's a pretty high hike in gas transit fees, they will receive extra money from Gazprom. But there is dissatisfaction from the Presidents office”.
Europe is currently buying Russian gas under long term contracts at a much higher price than the spot market or LNG.
Demand has fallen due to the crisis, creating unfavourable market conditions for energy suppliers. It perhaps stands to reason then, it's in Ukraine and Russia's interest to provide their customers with uninterrupted supplies, so as not to provide Europe with any further incentive to look elsewhere.
19.11.2009, 20:29
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It is obvious that Yuschenko always tries to black mail Russia each year during the cold season to hold European gas hostage, just like the American Puppet should behave. Anyone doubt George Soros' color revolutions and The National Endowment for Democracy involvement around the world, need to read more. If the Ukrainian people keep falling for these division tactics and being torn into East and West ideologies, they'll forever be a borderline failed state. You can't demand money every time you need it from your brother and then look elsewhere for better relations at the expense of your brother's relations and keep expecting good deals and subsidization projects of the economy. It is no less that being used and no one likes that. However, Russia tolerates this treatment from all the CIS nations and its responses are either tactical in return or just absolute tolerance. People need to work together in their own region a lot more. The Western interests are man power to fill positions in their foreign wars and occupations, and strategic zones of control to protect natural resources flowing into their hands. This is why you will always see this conflict arise until Ukraine is either bi-passed or Ukraine straightens up their act. Either way, more reliable partners are to the EAST which don't black mail relations or hold a Russophobic attitude.