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Ukraine/Russia: Agreement On Gas Consortium Reached At Summit

Ukrainian President Leonid Kuchma and Russian President Vladimir Putin are holding their second day of talks in Russia today, in a meeting their spokesmen say is centering on trade between the two countries. Today is Kuchma's birthday, and RFE/RL looks at what -- besides a gift of hunting gear from Putin -- the Ukrainian leader is bringing back home with him after the talks.

Prague, 9 August 2002 (RFE/RL) -- Russian President Vladimir Putin and Ukrainian President Leonid Kuchma spent the second day of their mini-summit today at the Russian leader's countryside holiday complex outside Moscow.

Putin proposed the meeting only three days before the talks began yesterday at the Kremlin. The talks are aimed at smoothing out perceptions of a recent deterioration in trade relations between the two neighbors and press speculation that a trade war was in the offing. Putin acknowledged some problems exist. "Some problems [between Ukraine and Russia] need corrections, constant corrections. Unfortunately, we are witnessing a reduction in trade turnover [between the two countries] and I think that was the reason why the Ukrainian president reacted so promptly in coming to Moscow for consultations," Putin said.

Russia is Ukraine's biggest trading partner but Ukraine has shown concern that the trade balance is too much in Russia's favor. The dispute escalated over the summer, when the sides threatened each other with retaliatory tariffs over goods, including cars, gas and oil pipes, cement, and steel.

Kuchma said that the dispute had not reached the level of a trade war, but said he was eager to defuse the disagreements. "When, in the press -- both [Russian] and [Ukrainian] -- the words 'trade war' come up, I think a bad peace is better than any kind of war. So I think while the fire is smoldering it should be put out," Kuchma said.

Yesterday's talks yielded the lifting of some trade restrictions. Russia announced it would lift import restrictions on Ukrainian pipes in 2003 and Ukraine agreed to remove the restrictions on 16 different types of Russian goods, excluding cars, which would have to be negotiated separately. Putin said the result was a success. "We have agreed in the course of our negotiations that on certain groups of products, restrictions will be lifted very soon. And we have developed a system of consultations that might be needed both today and in the future," Putin said.

Russian Deputy Prime Minister Viktor Khristenko said both countries' economy ministers will from now on meet on a regular basis to resolve potential disputes at an early stage before they cause serious rifts.

Potentially the most important subject discussed was troubled relations between Russia and Ukraine over the transit of Russian gas supplies across Ukraine. For years, Russia has accused Ukraine of illegally siphoning off gas worth billions of dollars for its own use or sale on the international market.

The two leaders announced progress on a gas consortium involving their two countries and Germany and said an agreement should be ready for signing at a Commonwealth of Independent States (CIS) summit on 7 October. Kuchma said after the agreement was signed that Germany should be drawn more deeply into the arrangements. "I want to agree that today we do not have any serious disagreements regarding the establishment of a gas consortium and we are willing to sign this document on 7 October and move from the bilateral process to a multilateral process," Kuchma said.

Russian Deputy Prime Minister Khristenko said two documents will be signed: an intergovernmental agreement on strategic partnership in the gas sector and a deal between Russia's Gazprom and Ukraine's Neftegas.

Putin and Kuchma, along with German Chancellor Gerhard Schroeder, signed an agreement on the consortium, aimed at ensuring steady gas supplies to Europe, during a June summit in St. Petersburg.

Russia's most important pipelines for exporting gas to the West run through Ukraine, and Russia is also Ukraine's main energy supplier. As part of the consortium project, Ukraine's pipelines will be upgraded and their capacity increased. The scheme is estimated to cost $2.6 billion.

Putin said that his talks with Kuchma had also focused on Ukraine's participation in the Eurasian Economic Community.

Today marked Kuchma's 64th birthday and Putin gave the Ukrainian president a birthday present of some hunting gear. The talks were switched from Moscow to the more relaxed setting of an opulent state residence in the Zavidovo National Park northwest of the capital. Today, the two leaders were expected to celebrate Kuchma's birthday in addition to discussing international matters.

In Ukraine, some politicians and political observers have dismissed the talks -- the fifth between Putin and Kuchma this year -- as insignificant and as a publicity maneuver by Kuchma to raise his prestige. Kuchma has been to a great extent ostracized by the West because of allegations of involvement in corrupt practices. He has also been blamed for breaches of human rights and failing to build democratic standards in his country.

Ukrainian Socialist Party deputy Vitaly Shypko said the fact that Putin gave only three days' notice before the talks meant that no serious preparations could have been made for true high-level discussions.

Ivan Lozowy, the director of an independent think tank in the Ukrainian capital, Kyiv, said that with Russia now the only important power treating Kuchma in a friendly manner, the isolated Ukrainian president is in a vulnerable position. "They put President Kuchma in such a position that he has to agree to everything. For example, it's possible that even without previous preparation or agreement between the two sides, the Russian side could at such a meeting as the current one, which was called with three days' notice, propose very important items for signing or declarations of principle that, without doubt, would be to Russia's advantage. The present situation is such, unfortunately, that President Kuchma will be forced to agree to all Russia's proposals," Lozowy said.

One such agreement working to Russia's advantage, Lozowy said, is the gas-consortium project. "Many specialists in the oil-and-gas industry foresee that Russia, through this idea of a gas consortium, is attempting to take control of Ukraine's gas-transport network," Lozowy said.

He said that if Russia wanted simply to buy the Ukrainian pipelines, that would provoke an outburst from many in Ukraine who would say it was a violation of their country's strategic interests. But involving a third country such as Germany, Lozowy said, would make it appear that Russia did not have a controlling interest in the scheme, although many Ukrainians, according to Lozowy, believe that is the Russian intention.

Lozowy doubts the latest meeting will enhance Kuchma's prestige and said the Ukrainian leader is perceived as very much the junior partner in talks with his Russian counterpart. "I don't think that these meetings -- even among Russian-speaking or pro-Russian sections of Ukrainian society -- benefit Kuchma, because he simply doesn't look presidential compared to Putin. The latter, in reality, summons him to meetings as if he were a subordinate. He uses diplomatic or half-diplomatic language to dictate what will be, whether it's to do with the gas consortium or a Eurasian union. And Kuchma has to appear as if he is making decisions for himself, whereas in reality he is simply taking instructions," Lozowy said.

Kuchma is supposed to fly later today to the Crimea for a vacation.