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Ukraine: State Seeks To Reduce Energy Debt To Russia, Turkmenistan

With the approach of the fall heating season, Ukraine is making renewed efforts to pay its overdue gas bills, sparking strategic calculations throughout the region. Special correspondent Michael Lelyveld reviews the latest developments.

Boston, 13 September 1999 (RFE/RL) -- On Thursday, a top Ukrainian energy official said the country is looking for ways to reduce its $930 million in gas debts to Russia and Turkmenistan. Ihor Bakay of Naftohaz Ukrainy, the country's state oil and gas company, said Ukraine officially owes $690 million to Russia and $240 million to Turkmenistan .

The problem is that Ukraine's suppliers say that it owes considerably more. The last accounting from Russia was given by former Prime Minister Sergei Stepashin. He estimated the gas debt at $1.8 billion. On August 27, a spokesman for President Saparmurat Niyazov said Turkmenistan was owed $665 million. In other words, Ukraine is counting less than 38 percent of the combined debts that are claimed.

Ukraine's tally excludes $270 million in Russian fines, which Kyiv has refused to recognize, as well as the debts of private companies, for which the government says it is not responsible.

The issue of Ukrainian gas debts has become a perennial charade. Russia has supplied Ukraine with gas since the Soviet breakup, despite payments that have always been too little or too late. Moscow has usually chosen to continue the deliveries because it depends on Ukraine for gas transit to Western Europe. Attempts to cut Ukraine's supplies have only resulted in diversions of gas.

The situation has led to a series of temporary settlements, usually involving barter for Ukrainian goods. One of Ukraine's recent schemes is to trade 10 of its mothballed bombers to Russia for part payment of its debts, although it is hard to say what Russia will do with more surplus planes.

On Thursday, Ukraine said it had agreed to establish a joint venture with Russia's Gazprom to build a new pipeline that will carry Russian gas to Bulgaria and Turkey. Ukraine's Naftohaz and Gazprom will own equal 35 percent shares, while two Turkish companies will own 30 percent.

The venture gives Ukraine a chance to pay part of its bill by undertaking construction of the 750-kilometer pipeline over the next three years. But like other solutions to the gas debt problem, this one may only yield more complications.

The pipeline joint venture, known as Gaztranzit, is a reminder that Russia has been trying for years to gain control of Ukraine's gas infrastructure as a way to reduce its dependence on Ukrainian transit routes. The equal shares in Gaztranzit suggest that the problem of control has only been deferred rather than solved.

The planned capacity of the new pipeline could also prove to be a problem. The line will reportedly allow Russia to increase its gas deliveries to Turkey by 35 thousand million cubic meters a year. Previously, Russia has said that it planned to raise its shipments through Bulgaria to only 19 thousand million cubic meters as part of its agreement to supply Turkey with 30 thousand million cubic meters by 2004.

Russia also plans to build pipelines across the Black Sea to Turkey for at least another 16 thousand million cubic meters a year. The result of all the plans would be a glut of Russian gas. Instead of 30 thousand million cubic meters, Russia is now planning pipelines to deliver at least 51 thousand million cubic meters a year.

The oversupply would mean even more trouble for Turkmenistan. The country, which is already owed vast sums by Ukraine, is also hoping to supply Turkey with gas. In May, Turkey agreed to buy 16 thousand million cubic meters of Turkmen gas in 2002. Turkmenistan hopes that a trans-Caspian pipeline would also carry an additional 14 thousand million cubic meters through Turkey for sales to Europe.

But the Russian increase would be a double disaster for Turkmenistan, which faces added competition for the Turkish market from Iran. More Russian supplies could squeeze Turkmenistan out of the market because it is the most distant supplier. In addition, Ukraine's improved Russian ties with the pipeline joint venture are likely to mean that it can rely on Moscow for gas this winter, reducing Kiev's incentive to pay its debts to Turkmenistan.

The $425-million discrepancy in Ukraine's accounting of its gas debt is an enormous shortfall for Turkmenistan, representing nearly 18 percent of its gross domestic product last year. Turkmenistan halted gas deliveries to Ukraine in May after its arrears rose too high. Ashgabat has complained that Ukraine has overvalued the goods and services it has supplied under a barter arrangement.

The Russian move with Ukraine appears to be a blow to plans for the trans-Caspian gas pipeline from Turkmenistan to Turkey. The line already faces resistance from Azerbaijan, which also wants to sell its own Caspian gas.

Turkmenistan could come to terms with Russia so that some of its gas would reach Turkey through the multiple Russian connections. But the last time that Ashgabat bargained with Gazprom in January, it was made to pay stiff transport charges to sell its gas to Ukraine. It may now have little to show for the deal except a pile of debts.