Ukraine sees no possibility to join Russia-led Customs Union despite gas discount promise

Kiev can not join the Moscow-led Customs Union of Russia, Belarus and Kazakhstan, a concession necessary to get a discount on Russian gas, Ukrainian Foreign Minister Kostyantyn Hryshchenko said on Monday.

But he said that Ukraine would try to solve its long-standing gas price dispute with Russia out of court, a week after Ukrainian President Viktor Yanukovych said that Kiev would seek arbitration in Stockholm if Russia did not offer a better deal on gas supplies.

“We believe that today, unfortunately, there are no realistic chances for (Ukraine’s) full-fledged participation in the Customs Union. At least because Ukraine is a World Trade Organization member, while our three partner countries are not,” Hryshchenko said at a news conference after a meeting with his Russian counterpart Sergei Lavrov.

Last week, Russian President Dmitry Medvedev said Ukraine might get discounts for gas if it joined the Customs Union. But Ukrainian Prime Minister Mykola Azarov said Kiev did not want a discount, just a fair deal.

Hryshchenko said that Ukraine was in talks with Astana and Minsk on accession to the union.

Ukraine will soon agree a free trade area with the European Union, said Hryshchenko. Russia expressed concern over Ukraine’s intention to integrate with Europe and was ready to take measures to defend its markets.

“I would not say that we are trying to drive someone somewhere, especially to drive Ukraine into the Customs Union. The point is that Ukraine should decide for itself whether it is interested in joining the Customs Union or not,” said Lavrov.

Although Kiev declined to join the Customs Union, it suggested Russia cooperate with the union under a ‘3+1’ scheme, which would not give it full membership.

“It was very clearly explained by Russian leaders, and our president has said it was impossible to be half in the Customs Union and half out,” Lavrov added.

Ukraine has been trying to revise a 2009 agreement with Russian gas giant Gazprom which tied the gas price to the price for oil boosting Kiev’s bill. Former prime minister Yulia Tymoshenko is now on trial for signing it.

Hryshchenko said Ukraine would try to settle the dispute out of court.

“There is always a group of people who are interested in hearing a matter in court – they are lawyers. We’ll do our best to make their life easier and find a solution within bilateral negotiations,” he said.

Last week, Azarov said Ukraine would liquidate its state-run energy firm Naftogaz, an acquisition target of Russian gas giant Gazprom, and revise all current agreements.

Medvedev has said the purchase of Naftogaz by Gazprom would help Kiev gain discounts on gas. Gazprom head Alexei Miller mentioned a merger of the two companies. But Azarov’s spokesman Vitaly Lukyanenko denied any talks on a merger between Naftogaz and Gazprom and said the liquidation was aimed at fighting energy dependence on Russia.

Analysts said Ukraine intended to spin off Naftogaz’s production capacities and keep them in its ownership to develop the country’s energy independence while the gas transit system is to be sold to Gazprom.

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