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Row Over Intermediaries Hurts Gas Talks, Ukrainian PM Says

Prime Minister Yulia Tymoshenko has attacked the role of RosUkrEnergo in talks.
KYIV (Reuters) -- Ukrainian Prime Minister Yulia Tymoshenko has said that talks over a 2009 contract to supply Russian gas were being derailed by disputes over her call to eliminate intermediaries.

She was speaking as hot water was cut off to entire districts of Kyiv in a row over payment of local gas bills.

Ukrainian and Russian officials resumed talks in Moscow, with Russian gas company Gazprom saying no contract could be signed until Ukraine's state energy company Naftohaz paid arrears exceeding $2 billion.

Russian officials also say settling debts is a condition for upholding a deal to phase in market prices over three years. Ukraine pays $179.50 per 1,000 cubic meters and Gazprom has threatened to increase that to $400 from next year.

Tymoshenko told a news conference that the insistence on keeping in place RosUkrEnergo, an intermediary in gas supplies since 2006, was hindering efforts to clinch a deal.

"There is fierce resistance to doing away with this corrupt go-between. Top politicians in our country are, unfortunately, making every effort to maintain corruption," she said.

"That is why the talks are proceeding with such difficulty. This is the sole reason for delays in concluding a contract."

Tymoshenko said nothing about who she believed was defending RosUkrEnergo and impeding the talks, though President Viktor Yushchenko has been less categorical in his statements.

The president and prime minister, allies in the 2004 Orange Revolution, have been at odds since Tymoshenko became prime minister for a second time a year ago -- despite the reinstatement of a coalition this week between their two political forces.

The three-year transition period was agreed in October talks between Tymoshenko and her Russian opposite number, Vladimir Putin. That deal was contingent on Kyiv paying remaining debts.

Tymoshenko has railed against RosUkrEnergo, a company owned jointly by Gazprom and two wealthy businessmen, since a pricing dispute in early 2006 caused a brief cutoff of supplies -- both to Ukraine and Russia's customers in Western Europe.

A top European Union official this week urged Russia and Ukraine to solve "once and for all" recurrent rows over gas.

In Kyiv, the local KyivEnergo energy company cut hot-water supplies to two-thirds of apartments in the city of 3 million.

KyivEnergo said it had failed to receive funds from city authorities for gas. Gas supplier Naftohaz has taken a harder line on debtors to help pay off its own arrears to Russia and says 90 percent of energy companies are behind in payments.

Tymoshenko blamed the breakdown on the mayor of Kyiv, a long-standing adversary. Yushchenko said it was unacceptable and a court ordered a resumption of services to homes.