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Ukraine: Russia's Gazprom Boss To Join Foreign Investment Council

Kyiv, 15 May 1998 (RFE/RL) -- Western diplomatic and business sources in Kyiv tell RFE/RL that the Chairman of the Board of Russia's Gazprom natural gas giant, Rem Vyakhirev, is to become a member of Ukraine's Foreign Investment Advisory Council (UFAIC). Vyakhirev arrived in Kyiv this week to discuss with President Leonid Kuchma means of resolving Ukraine's accumulated debt to Gazprom for natural gas deliveries, estimated by Moscow to be more than $1 billion.

The move marks a distinct, but, by no means, first step toward closer integration between the Russian and Ukrainian energy sectors, in general, and Vyakhirev and Ukraine's government of Prime Minister Valery Pustovoitenko, in particular, industry observers believe.

Made up of representatives of Western multi-national companies, whose goal is to advise Ukrainian officials on reform legislation and attracting foreign investment, the Advisory Council's influence on Ukraine's national decision-making has, to date, been limited to suggesting Kyiv work to improve the business environment. But, now that Ukraine's single-largest creditor will be sitting on the council, its influence may well increase, a Western businessman working here in the energy industry predicted.

"The next time the UFAIC recommends Ukraine do something Ukraine can't just ignore the council," the businessman tells RFE/RL. "The implied threat is that Gazprom can cut off the gas taps if its advice is not taken."

It will not be the first time Gazprom has worked closely with the highest levels of Ukraine's government. Last winter, Gazprom coordinated closely with Kyiv to ensure gas supplies, despite Ukraine's inability to pay for the fuel. During the coldest days of January, Vyakhirev negotiated directly with President Kuchma for emergency gas deliveries, effectively on credit. In part due to those unplanned deliveries, but, also because of domestic natural gas price supports that encourage increased consumption, the chronic Ukrainian debt to Gazprom has recently ballooned, doubling in the last six months.

Echoing frequent demands of Russian officials - that Ukraine either pay its bills or have its gas turned off - Vyakhirev has suggested partial or complete transfer of title of the Ukrainian national gas pipeline network from Ukraine to Gazprom, as a way to pay off the debt.

Ukraine has consistently declined that offer, because of fears that deeper Russian control of a critical energy distribution network would undermine Ukrainian economic sovereignty. Instead, Kyiv has attempted to control its gas debt by bartering aircraft engines and military installations, with limited success.

In addition to talks on Ukraine's gas debt, Russia's Itar-Tass news agency said it had learned that Vyakhirev would also discuss with officials in Kyiv further plans for a Ukraine-Russia-Turkey joint venture (Gastransit), for the reconstruction of operating gas pipelines and laying new ones across the territories of Ukraine, Moldavia, Romania and Bulgaria to Turkey's border. The news agency said the estimated cost of the project is $2 billion.