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Russia Demands Say On EU-Ukraine Gas 'Master Plan'


New gas pipelines to supply the EU are in sight.

New gas pipelines to supply the EU are in sight.

BRUSSELS (Reuters) -- Europe has welcomed a Ukrainian "master plan" to modernize infrastructure for carrying Russian gas to the European Union, but Moscow warned that the bloc's energy security might suffer if Russia was not consulted.

Ukraine presented an investment conference with the plan to spend billions of euros boosting the capacity of its gas pipelines from 140 billion cubic meters (bcm) each year by a further 60 bcm, and called for help from European investors.

"This unilateral approach...might lead to a great deal of damage to EU energy security," Russian Energy Minister Sergei Shmatko told the conference.

Ukraine, the EU executive, and three international banks signed a pledge of cooperation, aimed at encouraging investment and averting a repeat of this winter's gas crisis, caused by a price row between Kiev and Moscow.

That spat shook the EU, which has been uneasy about its reliance for energy on the newly assertive Moscow since Russia invaded neighboring Georgia last August.

“We can not allow our citizens to experience fuel shortages in the depths of winter again," said Benita Ferrero-Waldner, EU commissioner for external relations.

About a fifth of Europe's gas comes from Russia via Ukraine.

Ukrainian Prime Minister Yulia Tymoshenko described the proposal to modernize the network as a cheaper way of increasing EU gas imports than building long distance gas pipelines such as Nabucco from the Caspian region.

"The construction of new pipelines counts for billions, but if we just had 5.5 billion euros ($7.50 billion), outgoing capacity could be rapidly increased," she told the conference in Brussels.

But Russia's Shmatko said Moscow was worried the joint declaration paid little attention to Russia's needs as the EU's main gas supplier.

"The unilateral nature gives cause for concern and puzzlement," said Shmatko. "The draft declaration covers not only modernization, but also foresees a radical revision for supply and trade of gas."

Philippe Maystadt, president of the European Investment Bank, said reform of the Ukrainian gas trading system was essential to encourage investment in the country.

Ukrainian President Viktor Yushchenko said Ukraine was determined to streamline its gas market and to root out the corruption that has led to gas crises before.

"Our first aim is to replace out-of-date facilities," he told the investment conference. "We then need to introduce a high-precision metering system."

The joint declaration said Ukraine would ensure the gas network operator would become a truly independent commercial entity, which would provide fair and transparent tariffs for gas transport. It would also rent out its huge gas storage sites to third parties.

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