Accessibility links

Breaking News

Russia: Moscow Seeks Ukrainian Energy Payments

Russia and Ukraine have promised an agreement to settle the long-running issues of gas debts and pipeline transit next month. But Russian activity in the Baltics seems to suggest that Moscow has little confidence that any deal will last. RFE/RL correspondent Michael Lelyveld reports.

Boston, 22 August 2001 (RFE/RL) -- The Russian government is reporting progress on settling its energy problems with Ukraine, but it is still unclear whether basic differences have been overcome.

On 20 August, the two sides took a step closer by synchronizing their power grids for the first time since 1998, when Russia broke the connection with Ukraine in a dispute over $130 million in debts.

The renewed link was hailed by the countries' presidents and prime ministers.

Russian Prime Minister Mikhail Kasyanov said, "This opens possibilities for the transit supply of electricity from both Russia and Ukraine to Moldova and other countries."

Kyiv's refusal to meet earlier deadlines for the hookup had posed some troubling questions for Moscow, since Ukraine had already tied its grid to Moldova. The move raised the chance that Ukraine could convert Russian gas to electricity and sell it in Europe without paying for the fuel.

The conflict over Ukraine's debts for past gas use remains the big issue for Russia. For the past two years, Moscow has pursued a variety of schemes to either abandon the former Soviet pipelines through Ukraine to Europe or gain control over them.

This week, Kasyanov and Ukrainian Prime Minister Anatoliy Kinakh suggested that they are closer than ever before to settling the terms for repayment of $1.4 billion in debts, although Russia has previously claimed figures as high as $3 billion, including interest and fines. An agreement is now expected to be signed in September, although the two sides gave differing details, indicating that some divisions remain.

Kinakh told the Interfax news agency that Russia had "agreed in principle" to rescheduling terms that would "become similar" to those that Ukraine received recently from the Paris Club of official creditors.

Earlier this month, Turkmenistan rejected a Ukrainian proposal for the same terms to cover Kyiv's gas to Ashgabat, saying that Kyiv wanted repayment spread over the next 12 years.

Russia is stressing the security of whatever arrangement is eventually reached. Kasyanov said the "gist of the new agreement" is the "use of Russian transit to Ukraine as guarantees for gas payments to Russia," the "Financial Times" reported.

The complicated formula may be an indication that Moscow is willing to finesse the uncertainties of Ukraine's poor credit record to secure a transit agreement before the coming winter. It may also be a sign that the two sides may try to scrap Russia's practice of paying Ukraine for its transit with gas.

But Kinakh seems to be sticking to his insistence that the Ukrainian government will not take responsibility for the arrears of the state monopoly Naftogaz Ukrainiy, even though it is state-owned.

Kinakh repudiated a debt settlement deal reached by his predecessor Viktor Yushchenko shortly after taking office in May. Months of negotiations followed, while Kinakh continued to uphold President Leonid Kuchma's previous argument that the Naftogaz debt is really corporate and not a sovereign obligation of Ukraine.

The issue has drawn international attention because Ukraine serves as a corridor for 90 percent of Russia's gas exports to Europe at a time when the European Union is seeking to double its energy imports from Russia over the next 20 years.

The big question is whether the haggling will lead to a long-term agreement for gas transit, as promised, or only a short-term fix that will assure winter fuel and then fall apart again.

Ukraine's transit lines have unused capacity that could be upgraded and utilized to meet Europe's demand. But in the absence of a settlement, Russia has pursued a series of plans to build bypass lines through Poland and across the Baltic Sea.

The latest reports on bypass activity involve Lithuania. This week, the Russian newspaper "Izvestya" quoted Lithuanian sources as saying that Russia's Gazprom is seeking a share in the national gas company Lietuvos Dujos as part of a plan to build a bypass pipeline through the country to Europe.

Similar suspicions have followed an Agence France Press report this month that the Russian gas trader Itera is planning to build a huge underground storage facility in Latvia near Dobele, 70 kilometers southwest of Riga. The tanks would be the biggest in Europe, an Itera official told the "Business and Baltija" newspaper.

Such plans may show that Russia has little confidence that any lasting agreement can be reached with Ukraine. But hopes are still running high that a debt deal will cool the gas dispute before winter sets in.