IMPACT OF GAZPROM PRICING ON UKRAINIAN ELECTION CAMPAIGN EXAMINED
Nezavisimaya Gazeta
23 Aug 07
Moscow
[Report by Mikhail Sergeyev: "Gazprom Becomes Involved in Ukrainian
Elections" — taken from HTML version of source provided by ISP]
Russian gas is at the center of political battles in Ukraine again.
Ukrainian Deputy Prime Minister Andrey Klyuyev stated yesterday
[ 22 August] that the price for imported Russian gas would remain
unchanged in 2008 and that the hypothetical price increase would not
exceed the inflation rate.
Experts regard these promises as excessively optimistic.
A day earlier, the Naftohaz Ukrayiny head even announced the
exact price — $143 instead of the current level of $130 per 1,000
cubic meters. A very comfortable price for Russian gas became an
"unbeatable trump card" in the propaganda campaign being waged by
Viktor Yanukovych’s party on the eve of the Supreme Council early
election scheduled for 30 September. Yanukovych’s political opponents
have no arguments against these promises, because neither Viktor
Yushchenko’s Our Ukraine nor former premier Yuliya Tymoshenko’s
supporters enjoy Moscow’s favors. Nevertheless, some of them admit
that Gazprom is not making profits on deliveries to Ukraine, since it
purchases Turkmenistani gas at $100 and resells it with a minimum
markup to its Ukrainian joint venture RosUkrEnergo for further
distribution in Ukraine. At the same time opposition politicians
in Kiev insist that even a slight price increase should invariably
be accompanied by a revision of the fee paid by Russia for its gas
transit to Europe. Besides, they regularly raise the issue of giving
up RosUkrEnergo’s middleman services. They point out that Naftohaz
Ukrayiny and Gazprom are fully capable of reaching direct agreement
and thus save more than $900 million, which was RosUkrEnergo’s profit
earned on middleman services last year. Admittedly, Gazprom managed
a year ago to break the linkage between European transit charges
and the price of gas supplied to Ukraine, and it is unlikely that
Moscow will want to retreat to its former position again. Nor does
the concern see any reason to give up RosUkrEnergo’s services.
"We are conducting negotiations and it is too early to speak about
lowering or raising prices. I think we will know by mid-September
at what price we will be receiving gas next year," Andrey Klyuyev
stated on Wednesday [ 22 August]. At the same time he said: Ukraine
expects that it will be paying "the current price plus the inflation
rate." While answering a question on the possibility of increasing the
transit fee, Klyuyev stated that Ukraine and Russia "are conducting
negotiations at the expert level, but there have been no results
so far." Meanwhile, the question of revision of transit fees for
Russian gas has become all but the focal point of political clashes in
Ukraine. In response to Yuliya Tymoshenko’s accusations of national
treason, the Naftohaz Ukrayiny state company management issued a
statement that "in accordance with existing agreements the transit
fee is fixed at $1.6 per 1,000 cubic meters per 100 kilometers and
cannot be changed before 2009."
Nezavisimaya Gazeta was explained at Gazprom that "the transit fee
was set in January 2006 for five years" and declined to comment on
the progress of the talks on the gas price for Ukraine in 2008.
RosUkrEnergo official representative Andrey Knutov told Nezavisimaya
Gazeta yesterday that "the volume of the gas price increase for Ukraine
in 2008 will become known only during the course of negotiations which
should take place this fall." According to him, disputes over the price
may continue in September, as well as October or November. The basic
terms of delivery were approved by the parties long ago, whereas the
new price for 2008 can be set in an addendum to the earlier agreements
between RosUkrEnergo and UkrHazEnerho (Naftohaz Ukrayiny’s subsidiary),
which resells Russian gas on Ukraine’s territory.
Meanwhile, Yuliya Tymoshenko bloc member Oleksandr Klyus told
Nezavisimaya Gazeta yesterday: "Even the slightest price increase
should be accompanied with an increase in the transit fee, which is
much lower than the average European level of $2.2 per 1,000 cubic
meters per 100 kilometers." At the same time, Klyus emphasized:
This demand fully reflects the fundamental position of Yanukovych’s
opponents.
At the same time Viktor Yanukovych himself publicly promised at a
Cabinet meeting in September 2006 that the gas price for Ukraine
"will remain better than the price paid by its neighbors until
2010." Naftohaz state company representatives also emphasize
the preferential character of the current Russian gas price for
Ukraine. They underscore that the price of $130 is "the most acceptable
commercial proposal in the region." "Armenia purchases gas at $180,
the Baltic states at $200-210, Poland at $240, and Slovakia and Hungary
at $250. Even Moldova, which is situated farther away from natural gas
suppliers than Ukraine, purchases fuel at $160," Naftohaz Ukrayiny
specialists wrote. Having said that, the cited data does not fully
reflect reality, for it does not mention gas deliveries to Belarus
at $100 per 1,000 cubic meters and obviously overstates the price for
Russian gas supplied to Armenia. Yerevan proposed Gazprom co-ownership
of a number of energy facilities and will receive Russian gas at $110
per 1,000 cubic meters through 2009 in exchange for this. Therefore,
Viktor Yanukovych has not fully managed to keep his promise.
Having said that, supporters of Viktor Yanukovych’s Party of the
Regions could cite prices paid for Russian gas by Georgia and Moldova,
the countries that are at loggerheads with Moscow. Gazprom set the
tariff at $235 per 1,000 cubic meters for Georgia. At the same time,
Gazprom spokesman Sergey Kupriyanov stated in July that "Georgia is
currently paying this price normally" and "the price will probably
remain at the same level in 2008." As for Moldova, it was stated in
Gazprom’s press release that the country is purchasing Russian gas
at $170; "the price will gradually go up in 2008-2010 and will reach
the level of average European prices by 2011."
Experts are not convinced that Viktor Yanukovych will manage again
to fulfill his promise that the price for Russian gas in 2008 will
increase solely to offset inflation. "If Russian-Ukrainian relations
do not sharply deteriorate after the September election, we can fully
expect a price increase of 15-20 percent in 2008," Aleksey Belogoryev,
Institute of Natural Monopoly Problems analyst, opined.
Having said that, the Supreme Council election will be over by the
time of setting the gas price for 2008, whereas the Party of the
Regions will have reaped dividends from its optimistic promises.