Yanukovich orders govt to prevent negative impact of gas prices on economy

KIEV, August 22 (Itar-Tass) —— Ukrainian President Viktor Yanukovich instructed the government to prevent a negative impact of high prices for imported natural gas on the national economy.

High gas prices can undermine long-term cooperation between Ukraine and Russia, Prime Minister Nikolai Azarov said earlier.

“Sooner or later, an unequal agreement will undermine the foundation of such long-term cooperation,” he said.

“No matter now beneficial the agreement may be for one side at a certain point in time, the existence such unequal agreement will sooner or later undermine the foundation of long-term cooperation very seriously,” Azarov said.

The prime minister said the current price of natural gas was not a market one. “We do not need discounts. We need do not need preferences. We want fairness,” he said.

Yanukovich said he would like to reach an agreement with Russia on a reduction of the price for Russian natural gas supplies for Ukraine by almost 20 percent to 240 U.S. dollars per 1,000 cubic metres.

Ukraine continues to insist on a revision of the gas agreements with Russia.

According to Azarov, “a fair gas price for Ukraine would be about 200 U.S. dollars per 1,000 cubic metres of Russian gas”.

“The current gas price is 320 U.S. dollars per 1,000 cubic metres for Poland and 330 U.S. dollars for Germany,” Azarov said. “If the transport component and some other expenses are excluded from this price, a fair gas price for Ukraine, consistent with contracts with Western partners, would be about 200 U.S. dollars per 1,000 cubic metres.”

The prime minister recalled that Russia had agreed to begin negotiations on the gas price.

Azarov noted positive steps in the “gas dialogue” with Russia and said that Kiev and Moscow had agreed in February that four billion cubic meters of gas would be supplied to Ukraine at a price of 170 U.S. dollars per 1,000 cubic metres for the needs of the chemical industry. Such agreement on the eve of the spring sowing campaign allowed us to make fertilisers at an acceptable price and meet the needs of the Ukrainian agro-industrial sector”.

Russia and Ukraine did not discuss changes to the current gas pricing formula during Russian Prime Minister Vladimir Putin’s latest visit to Kiev.

“We did not negotiate a revision of the pricing principles,” Putin said earlier.

“Our position is that there is the contract that is in effect and should be complied with,” he said, commenting on his working visit to Ukraine in mid-April.

Ukrainian partners have repeatedly raised the question of gas prices. “I promised that we would look at the pricing parameters by the country. On the whole we have the same pricing principles for all of our partners,” he said.

The prime minister stressed that if Ukraine thinks that effective gas contracts contain some inaccuracies, “we are ready to consider them”.

“But right now our position is that the contract is in force and must be abided by,” Putin said.

“We ready to reread our agreements attentively again and if there is something that creates certain pricing inaccuracies, we are ready to study them. But this does not mean that we will revise the current contract,” he said.

“I say this again for all parties to the process to understand this clearly: the effective contract is working and must be implemented,” Putin said.

On January 19, 2009, Russia and Ukraine made 10-year contracts until 2020 for the transit of Russian natural gas to Europe through Ukraine and for gas supplies to Ukraine on the basis of the European pricing formula. Under these agreements, Russian gas is supplied to Ukraine at a 20 percent discount, while the transit rate remained at the 2008 level of 1.7 U.S. dollars for 1,000 cubic metres per 100 kilometres.

On January 1, 2010, the sides switched to market gas prices. According to Russia’s Gazprom, 94.6 billion cubic metres of gas were transported through Ukraine in 2010. The transit rate for the Russian gas in 2010 was 2.7 dollars for 1,000 cubic metres per 100 kilometres on the average. In the first quarter of 2011, it was raised to 2.94 U.S. dollars, and Ukraine started talking about new increases for Russia.

In 2010, Ukraine bought gas the average annual price of 337 U.S. dollars per 1,000 cubic metres. In the first quarter of the year, the price was 305 U.S. dollar per 1,000 cubic metres. On April 21, after talks between Medvedev and Yanukovich in Kharkov, Gazprom and Naftogaz Ukrainy signed an addendum to the agreement on gas supplies and gas transit to Europe of January 19, 2009. The addendum gave Ukraine a discount of 100 U.S. dollars if the price exceeds 330 U.S. dollars per 1,000 cubic metres, or 30 percent of the price.

According to the documents, the discount became effective from April 1, 2010. So, the price of gas for Ukraine was 236 U.S. dollars per 1,000 cubic metres in the second quarter of the year, 248 U.S. dollars in the third quarter, and 250 U.S. dollars in the fourth quarter.

Under the agreement reached on October 27, 2010, the price of Russian gas was about 264 U.S. dollars per 1,000 cubic metres in the first quarter of 2011, 295.6 U.S. dollars in the second quarter and 355 U.S. dollars in the first quarter. The average price of gas for Ukraine in 2011 will be 280 U.S. dollars per 1,000 cubic metres, as was projected.


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