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Russia/Ukraine: Questions Raised About Gas Deal Intermediary

(epa) The solution to the ongoing gas conflict reached between Gazprom and Naftohaz Ukrayina, the Ukrainian state oil and gas company, announced today raises more questions than it does answers.

Gazprom head Aleksei Miller announced that an offshore company, RosUkrEnergo, will be the middleman for gas sales from Russia, Turkmenistan, Uzbekistan, and Kazakhstan to Ukraine. The company will sell a mixture of gas from these countries to Ukraine at a price of $95 per 1,000 cubic meters. Gazprom will sell RosUkrEnergo gas at $230 per 1,000 cubic meters.

Eural Trans Gas

RosUkrEnergo has previously acted as the intermediary for Turkmen gas sales to Ukraine. It took over the role of another offshore company formed in December 2001 in Hungary, Eural Trans Gas (ETG).

In December 2002, ETG signed contracts with Gazprom and Naftohaz Ukrayina to act as the intermediary for gas shipments from Turkmenistan to Ukraine. As the intermediary, they ensured payment of all transit costs and duties. The Ukrainian side paid ETG with 13 billion cubic meters of gas for its services. ETG then sold this gas on to Europe at substantially higher prices.

ETG soon came under suspicion in the media of being involved with Russian organized-crime figures. In July 2004, during a Ukrainian-Russian business forum in Yalta, then Russian and Ukrainian presidents, Vladimir Putin and Leonid Kuchma, respectively, announced that ETG would be replaced by a new company, RosUkrEnergo.

RosUkrEnergo was touted as a transparent successor to ETG and was registered in Zug, Switzerland on 22 July 2004. It consisted on the Russian side of Arosgas Holdings AG, named in the founding documents as a company "affiliated with GazpromBank" and GazpromBank itself, a wholly owned Gazprom subsidiary.

Joint Venture

On the Ukrainian side, RosUkrEnergo is represented by Raiffeisen Investment AG, a member of the Raiffeisen central bank group. Raiffeisen Investment CEO Wolfgang Putschek stated that his company is not a partner in RosUkrEnergo, but merely manages the portfolios of a "number of private Ukrainian investors" in RosUkrEnergo, "The Moscow Times" reported on 28 July. Putschek refused to name these investors citing Austrian confidentiality laws.

When the new Ukrainian government of Viktor Yushchenko came to power in January 2005, one of the first acts of Prime Minister Yuliya Tymoshenko was to call for a criminal investigation into RosUkrEnergo, calling it a "criminal enterprise." Shortly afterwards, Oleksandr Turchinov, the head of the Ukrainian security service, the SBU, announced that a criminal case had been launched against RosUkrEnergo.

The investigation abruptly ended in mid-August 2005. Soon after Turchynov's removal as head of the SBU, the Ukrainian daily website reported on 21 September 2005 that the SBU officer in charge of the investigation of RosUkrEnergo, Andriy Kozhemyakin, was transferred from the case to other duties.

Gazprom has not come under any official scrutiny in Moscow for its role in the RosUkrEnergo or ETG gas schemes.

How the inclusion of RosUkrEnergo into the settlement of the Ukrainian-Russian gas conflict will play out in the West is not yet known, but it will raise many eyebrows in Europe and the United States. The U.S. FBI has been investigating RosUkrEnergo for some time now and European law-enforcement agencies are also aware of the allegations in this case. /la

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