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Ukraine: Deadline Nears On Russian Gas Cut-Off

Russian gas pipeline (file photo) (ITAR-TASS) With hours to go before a New Year's Day deadline, Ukraine has the choice of agreeing to a more than fourfold increase in the price of Russian gas or receiving no gas from Russia -- or of finding some last-minute solution.

Prague, 31 December 2005 (RFE/RL) -- Russia's giant state-owned company Gazprom says Ukraine has less than 24 hours to agree to a more than fourfold increase in natural gas prices before it cuts off all supplies to the country of 48 million people.

Gazprom chairman Aleksei Miller said on 30 December that Russia would "act decisively and clearly" if "in the hours left to the beginning of the New Year Ukraine does not sign a contract on gas supplies."

Supplies of gas from Russia to Ukraine would be "completely stopped" at 10:00 am Moscow time.

A cut-off could also impact Western Europe, which receives supplies from Gazprom using pipelines that pass through Ukraine. However, Miller sought to ease concerns in the EU by saying that Gazprom has drawn up a detailed plan to ensure that supplies to European consumers will remain undisrupted.

On 29 December, Miller rejected a request by Ukrainian President Viktor Yushchenko for a 10-day price freeze, arguing that in his view such a move would merely encourage the Ukrainian government to seek fresh prize freezes after 10 January.

Yushchenko has rejected an offer from Russian President Vladimir Putin to receive billions of dollars worth of credit with which to buy Russian gas -- provided Kyiv accepts Gazprom's price demands.

Speaking in an interview broadcast by three Ukrainian television stations on 30 December, Yushchenko repeated Kyiv's position that the price being asked for by Gazprom is unacceptable. He said that a "quick estimate" by the Ukrainian government of Gazprom's price demand -- $230 per 1,000 cubic meters of gas -- indicated that the demand was "unacceptable. Unacceptable first of all not because the prices are high, but because they are not economically justified."

Yushchenko questioned Russia's pricing policy. "Why Ukraine should pay $230? Why do Baltic countries pay $120 while Belarus pays $46.68, Turkey pays $100 and the Caucasus republics $100 to $110? Ukraine is located closer to Russia than any of these countries. So natural gas from Russia has to be transported a shorter distance. So why should Ukraine pay $230?"

The Ukrainian leader indicated that a reasonable price for Ukraine to pay would be $75-80 per 1,000 cubic meters of gas.

Yushchenko said Kyiv did not want the dispute over natural gas prices to deteriorate into a tit-for-tat political dispute, adding that no serious politician in Ukraine would seek retribution for the threat to Ukraine's gas supply by demanding a revision of the terms of the agreement under which Russia's Black Sea Fleet uses bases in the Crimea.

The Ukrainian president noted, however, that Kyiv does have questions about how Moscow is observing some terms in agreements relating to the Black Sea Fleet. Russia has not yet handed over 178 navigation facilities and radio frequencies, he stated, and Kyiv has questions about "technical issues" relating to 150 plots of land and some 170 pieces of real estate.

Yushchenko made clear that he believes Moscow is trying to use natural gas prices to influence politics within Ukraine, saying that "I think this issue is clearly connected with the upcoming elections in Ukraine."

"I want to say that politically both sides are correct," Yushchenko said. "But we should make our relations more orderly. We need to leave the period of feudalism behind. Only then we will be honest to each other. There is no need for ultimatums, no need to demonstrate political or economic pressure. I don't believe and I don't want to believe that it is a form of Russia's pressure. I don't want to believe this because it is humiliating form of relations for us as partners.

Yushchenko also sought to ease concerns in Ukraine about possible gas shortages, saying that natural gas from Turkmenistan could help fill any shortfalls in supply. "We reached an agreement with the president of Turkmenistan 10 to 12 days ago, in which we agreed on volumes, schedules, and the price for supplies of Turkmen gas in [the coming year]. Starting in January, the price for Turkmen gas will be $50 and volumes of supplies in the next year will be 40,000 million cubic meters. This covers more than a half of Ukraine's gas needs for next year."

Meanwhile, the European Commission has held special meetings of its gas coordination group to discuss how to "deal with all eventualities" -- including the prospect that Russian gas shipments to Western Europe might be interrupted by cuts in shipments to Ukraine.

In a statement, the European Commission said it is confident that the dispute will not lead to shortages in Europe now, when demand for natural gas is peaking because of cold winter weather.

But in Warsaw, Polish Economy Minister Piotr Wozniak said that supplies to his country would be under threat if Gazprom were to turn off the taps of the pipelines that run through Ukraine.

Poland receives 90 percent of its imported gas from the east and relies heavily on the pipelines that cross Ukraine. Wozniak said Poland could satisfy its domestic gas demand for about one week if supplies of gas to Ukraine are cut.