Ukraine Refuses to Pay Over $179.5 for 1,000 cu m of Gas

Ukraine Refuses to Pay Over $179.5 for 1,000 cu m of Gas

Kiev refuses to pay over $179.5 per 1,000 cubic meters for the Russian natural gas it has consumed in 2008, the Ukrainian premier said on Tuesday ahead of talks with Russia on a long-running gas dispute, Rian reported.

The former Soviet allies partially resolved their dispute last Thursday, agreeing that Ukraine would pay off about $1 billion of its debt and that talks would continue on a supply scheme for 2008. The agreement came after Russian gas monopoly Gazprom had restored gas supplies - cut by 50% early last week - to Ukraine. The parties are to resume talks on Wednesday.

Yulia Tymoshenko said strict instructions had been given to Ukraine’s state gas company Naftogaz not to pay more than $179.5 per 1,000 cubic meter of natural gas consumed in 2008. “There can be no other price than $179.5,” a Ukrainian government spokesman quoted Tymoshenko as saying. The Ukrainian premier is currently on a working visit to Brussels. Tymoshenko also said that under the instructions Ukraine would pay a maximum of $130 for every 1,000 cubic meters of gas consumed last year.

The latest spat between Moscow and Kiev raised fears among gas consumers that Ukraine could tap gas destined for shipment to Europe to make up for the shortfall brought about as a result of Gazprom’s cuts. The former Soviet allies agreed last year to supply gas at $179 for 1,000 cubic meters (cu m.) in 2008 for Central Asian gas brought by Gazprom. The price for Russian gas was set at $315 per 1,000 cu m. Referring to officials in the national energy companies of Uzbekistan and Turkmenistan and Kazakhstan, Gazprom said earlier in the day that the ex-Soviet Central Asian states would begin exporting their natural gas at European-level prices from 2009.

Gazprom buys Central Asian gas at lower prices than it sells to Europe. The planned increase therefore promises an according price rise for European consumers.

Former Soviet Central Asian countries will begin selling natural gas at European levels next year, Russia’s state-controlled monopoly said Tuesday, which could result in markedly higher prices for European consumers. The decision „is based on the interests of the national economies and takes into account international obligations to ensure reliable and uninterrupted energy supplies,” said a statement released after a meeting between Gazprom head Alexei Miller and the heads of the national gas companies of Kazakhstan, Uzbekistan and Turkmenistan. The brief statement did not specify how the „European prices” would be calculated. But it appeared to foretell a significant hike for end users because Gazprom currently buys gas from these countries at comparatively low prices before reselling it to Europe.

Gazprom estimates that its average price for European contracts this year will be about $354 (€230) per 1,000 cubic meters, whereas it currently buys Turkmen gas for $130 (€85) per thousand cubic meters, according to the state news agency RIA-Novosti. The Central Asian gas consumed in Western Europe travels through pipelines controlled by Gazprom. The announcement also appeared to indicate new difficulties for Russia’s neighbor Ukraine, which has been sparring with Russia for months over gas debts and contract terms. Most of Ukraine’s gas imports come from Central Asia, for which it pays $179.5 (€117) per thousand cubic meters, buying the gas through an intermediary company half-owned by Gazprom.

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