Monthly Archives: December 2005

THE ACTION UKRAINE REPORT – AUR – Number 630

“THE ACTION UKRAINE REPORT – AUR”

An International Newsletter, The Latest, Up-To-Date
In-Depth Ukrainian News, Analysis and Commentary

“Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World”

WE WON’T BE BLACKMAILED FOR LAST YEAR’S CHOICE

Dear Mr Putin, darling Vladimir,
Warmest wishes for the New Year,
A peaceful, undisturbed New Year’s day,
Stop worrying if the neighbors will pay.

12 months ago we overthrew a regime
Full of cronies: crooked and mean,
The people rose from their knees
And now you want us to freeze?

Although today it’s rather cold
The pipeline will not be sold
The people in Ukraine are strong
and will overcome evil and wrong.

We wish you warmth and delight
May your New Year’s day be bright,
But we won’t be blackmailed for last year’s choice
Freedom – no more fear to express liberty’s voice.

(Author’s e-mail name is Andy100) Web Link

“THE ACTION UKRAINE REPORT – AUR” – Number 630
Mr. E. Morgan Williams, Publisher and Editor
Washington, D.C., SATURDAY, DECEMBER 31, 2005

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1. COUNTDOWN TO RUSSIA’S CUTTING UKRAINE GAS HAS BEGUN

Agence France Presse, Moscow, Russia, Saturday, Dec 31, 2005

MOSCOW (AFP) – The final countdown has begun for Russia’s politically charged threat to end gas supplies to neighbouring Ukraine on New Year’s Day unless the ex-Soviet republic agrees to a more than fourfold increase in prices.

Russia’s giant state-owned company Gazprom, which controls a third of the world’s gas reserves, says supplies to the country of 48 million people will be switched off Sunday at 10:00 a.m. in Moscow (0700 GMT) if Kiev still refuses the new price.

“The actions will be precise and resolute,” Gazprom chief Alexei Miller warned.

Gazprom wants Ukraine to pay 230 dollars (185-194 euros) per 1,000 cubic metres (35,316 cubic feet) of gas, up from the current price of 50 dollars from the start of 2006. The company says that this price merely reflects standard world rates.

Ukraine says it is ready to pay more but not so quickly and is offering up to 80 dollars in a preliminary transition period. Moscow has flatly dismissed the offer.

Officials in Kiev say that industrial centres will see a drop in supplies, but that ordinary people should notice no difference, as the country has enough reserves to last the bitterly cold winter. “The people will feel nothing,” Prime Minister Yury Yekhanurov promised. Ukraine is “ready for any cataclysm.”

President Viktor Yushchenko on Friday appointed a new deputy prime minister with a brief to manage the energy sector and achieve self-sufficiency for Ukraine “in four years.”

There was mounting concern about the possible knock-on effect of the row for western Europe, which is heavily dependent on Russian energy supplies, most of which transit through Ukraine.

Miller said Gazprom had a “detailed plan of measures” to guarantee EU supplies. However the European Commission called a special meeting of its gas coordination group for Wednesday to discuss how to “deal with all eventualities.”

Polish Economy Minister Piotr Wozniak said that supplies to his country, which receives 90 percent of its imported gas from the east, were under threat.

“The harmful potential effects of a fall in deliveries risks being felt in Poland from the first days of January,” he said. Wozniak added that in the event of supply disruptions, “commercial and
technical conditions” meant Poland would be able to satisfy domestic gas demand for at least a week.

The European Commission said it was “confident” that the dispute would not lead to a shortage just as demand spikes in Europe on account of cold winter weather.

“Even if a limited part of European supplies were to be interrupted, given the level of gas stocks and supplies from other areas, the (European) Commission is confident that this would not cause a gas shortage in Europe in the short term,” it said.

There are strong political overtones to what Gazprom says is purely commercial dispute. Yushchenko came to power almost exactly a year ago in the pro-Western “orange revolution” that saw him defeat a Russian-backed candidate in elections and vow to bring Ukraine into the European Union and NATO.

In March his supporters face a strong challenge in parliamentary elections that analysts say could signal the comeback of his pro-Kremlin rival Viktor Yanukovich. -30-

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1. COUNTDOWN TO RUSSIA’S CUTTING UKRAINE GAS HAS BEGUN

Agence France Presse, Moscow, Russia, Saturday, Dec 31, 2005

MOSCOW (AFP) – The final countdown has begun for Russia’s politically charged threat to end gas supplies to neighbouring Ukraine on New Year’s Day unless the ex-Soviet republic agrees to a more than fourfold increase in prices.

Russia’s giant state-owned company Gazprom, which controls a third of the world’s gas reserves, says supplies to the country of 48 million people will be switched off Sunday at 10:00 a.m. in Moscow (0700 GMT) if Kiev still refuses the new price.

“The actions will be precise and resolute,” Gazprom chief Alexei Miller warned.

Gazprom wants Ukraine to pay 230 dollars (185-194 euros) per 1,000 cubic metres (35,316 cubic feet) of gas, up from the current price of 50 dollars from the start of 2006. The company says that this price merely reflects standard world rates.

Ukraine says it is ready to pay more but not so quickly and is offering up to 80 dollars in a preliminary transition period. Moscow has flatly dismissed the offer.

Officials in Kiev say that industrial centres will see a drop in supplies, but that ordinary people should notice no difference, as the country has enough reserves to last the bitterly cold winter. “The people will feel nothing,” Prime Minister Yury Yekhanurov promised. Ukraine is “ready for any cataclysm.”

President Viktor Yushchenko on Friday appointed a new deputy prime minister with a brief to manage the energy sector and achieve self-sufficiency for Ukraine “in four years.”

There was mounting concern about the possible knock-on effect of the row for western Europe, which is heavily dependent on Russian energy supplies, most of which transit through Ukraine.

Miller said Gazprom had a “detailed plan of measures” to guarantee EU supplies. However the European Commission called a special meeting of its gas coordination group for Wednesday to discuss how to “deal with all eventualities.”

Polish Economy Minister Piotr Wozniak said that supplies to his country, which receives 90 percent of its imported gas from the east, were under threat.

“The harmful potential effects of a fall in deliveries risks being felt in Poland from the first days of January,” he said. Wozniak added that in the event of supply disruptions, “commercial and
technical conditions” meant Poland would be able to satisfy domestic gas demand for at least a week.

The European Commission said it was “confident” that the dispute would not lead to a shortage just as demand spikes in Europe on account of cold winter weather.

“Even if a limited part of European supplies were to be interrupted, given the level of gas stocks and supplies from other areas, the (European) Commission is confident that this would not cause a gas shortage in Europe in the short term,” it said.

There are strong political overtones to what Gazprom says is purely commercial dispute. Yushchenko came to power almost exactly a year ago in the pro-Western “orange revolution” that saw him defeat a Russian-backed candidate in elections and vow to bring Ukraine into the European Union and NATO.

In March his supporters face a strong challenge in parliamentary elections that analysts say could signal the comeback of his pro-Kremlin rival Viktor Yanukovich. -30-

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2. CLOCK TICKS AWAY ON UKRAINE’S GASBBC NEWS, United Kingdom, Saturday, December 31, 2005

BBC NEWS, United Kingdom, Saturday, December 31, 2005

Time is running out for Ukraine to strike a price deal to avert Moscow’s
threat to begin the New Year by turning off gas supplies to its neighbour.
Russia’s Gazprom, which provides 30% of Ukrainian gas, wants to replace
the current barter system with market rates for gas and pipeline transit
fees.

The four-fold price hike is unacceptable to Ukraine – the main route for
Russian gas to the West. Both sides show no sign of relenting before the
0700 GMT Sunday deadline.

Ukraine’s pro-Western President, Viktor Yushchenko, went on national
television networks on Friday evening to defend his position, saying he
hoped that his personal good relations with his Russian counterpart,
Vladimir Putin, would resolve the dispute.

His appeal earlier in the day for a 10-day stay of execution was rejected
immediately by Gazprom.

The company has invited Russian TV cameras to its headquarters in

Moscow to broadcast the gas supply shutdown live in special news
bulletins on one of the biggest holidays in the former Soviet Union.

Many in Ukraine believe Russia’s moves are politically designed to
manufacture a crisis over energy supplies, the BBC’s Damian

Grammaticas reports from Moscow.

They believe Mr Putin wants to punish Ukraine for its so-called Orange
Revolution and moves to join the European Union and Nato, leaving
Russia’s sphere of influence, our correspondent adds.
‘HUMILIATING’
Ukrainian gas industry officials have said the country’s heating needs over
the harsh winter can be met from domestic production but supplies to
industrial customers may have to be reduced.

Justifying his rejection of the Russian price hike, Mr Yushchenko said that
he did not want to believe Russia was using gas as a lever to put pressure
on his country. “That frankly humiliates us as a negotiating partner,” he
said.

However, Gazprom, he argued, was varying the price of its gas according to
customer and he contrasted the $47 Belarus – a close ally of Moscow – would
be expected to pay per 1,000 cubic metres with the $230 being asked of
Ukraine.

“A price of $230 is unacceptable not because it is high but because there
are no economic grounds for it,” he said.

Adding to the pressure, former Prime Minister Yulia Tymoshenko – a leading
figure in the Orange Revolution – said that anyone who agreed to the new
market prices would be a “traitor to Ukraine”.

Ukraine, which currently pays $50 per 1,000 cubic metre, has said it is
prepared to phase in world prices gradually and can only raise its payment
to about $80 for now.

It links this figure to Gazprom’s offer to raise the pipeline transit fee it
now pays – $1.09 per 1,000 cubic metre per 100km – to about $1.8.
Ukraine has been asking for at least $2.
‘NO DISRUPTION’
Russian gas is expected to fetch on average about $240 in the European
Union next year, according to analysts.

Gazprom said it had a “detailed plan” in place to ensure gas supplies
transiting Ukraine would not be disrupted, and said any attempt by
Ukraine to siphon off gas would be “theft”.

With Russia supplying about a fifth of the EU’s gas, the European
Commission said it was “confident” the dispute would not lead to a
shortage in the short term.

Even if some supplies were interrupted, it added, “the level of gas stocks
and supplies from other areas” would cover this.

President Putin has offered Ukraine credit worth $3.6bn to cover the
new gas cost but this was rejected by Kiev. -30-

GAZPROM’S 2006 TARIFFS PER 1,000 CUBIC METRES OF GAS
Ukraine: US$230; Belarus: US$47; Armenia and Georgia: US$110
Romania: US$280; Average EU charge: US$240
source: AP news agency

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2. CLOCK TICKS AWAY ON UKRAINE’S GASBBC NEWS, United Kingdom, Saturday, December 31, 2005

BBC NEWS, United Kingdom, Saturday, December 31, 2005

Time is running out for Ukraine to strike a price deal to avert Moscow’s
threat to begin the New Year by turning off gas supplies to its neighbour.
Russia’s Gazprom, which provides 30% of Ukrainian gas, wants to replace
the current barter system with market rates for gas and pipeline transit
fees.

The four-fold price hike is unacceptable to Ukraine – the main route for
Russian gas to the West. Both sides show no sign of relenting before the
0700 GMT Sunday deadline.

Ukraine’s pro-Western President, Viktor Yushchenko, went on national
television networks on Friday evening to defend his position, saying he
hoped that his personal good relations with his Russian counterpart,
Vladimir Putin, would resolve the dispute.

His appeal earlier in the day for a 10-day stay of execution was rejected
immediately by Gazprom.

The company has invited Russian TV cameras to its headquarters in

Moscow to broadcast the gas supply shutdown live in special news
bulletins on one of the biggest holidays in the former Soviet Union.

Many in Ukraine believe Russia’s moves are politically designed to
manufacture a crisis over energy supplies, the BBC’s Damian

Grammaticas reports from Moscow.

They believe Mr Putin wants to punish Ukraine for its so-called Orange
Revolution and moves to join the European Union and Nato, leaving
Russia’s sphere of influence, our correspondent adds.
‘HUMILIATING’
Ukrainian gas industry officials have said the country’s heating needs over
the harsh winter can be met from domestic production but supplies to
industrial customers may have to be reduced.

Justifying his rejection of the Russian price hike, Mr Yushchenko said that
he did not want to believe Russia was using gas as a lever to put pressure
on his country. “That frankly humiliates us as a negotiating partner,” he
said.

However, Gazprom, he argued, was varying the price of its gas according to
customer and he contrasted the $47 Belarus – a close ally of Moscow – would
be expected to pay per 1,000 cubic metres with the $230 being asked of
Ukraine.

“A price of $230 is unacceptable not because it is high but because there
are no economic grounds for it,” he said.

Adding to the pressure, former Prime Minister Yulia Tymoshenko – a leading
figure in the Orange Revolution – said that anyone who agreed to the new
market prices would be a “traitor to Ukraine”.

Ukraine, which currently pays $50 per 1,000 cubic metre, has said it is
prepared to phase in world prices gradually and can only raise its payment
to about $80 for now.

It links this figure to Gazprom’s offer to raise the pipeline transit fee it
now pays – $1.09 per 1,000 cubic metre per 100km – to about $1.8.
Ukraine has been asking for at least $2.
‘NO DISRUPTION’
Russian gas is expected to fetch on average about $240 in the European
Union next year, according to analysts.

Gazprom said it had a “detailed plan” in place to ensure gas supplies
transiting Ukraine would not be disrupted, and said any attempt by
Ukraine to siphon off gas would be “theft”.

With Russia supplying about a fifth of the EU’s gas, the European
Commission said it was “confident” the dispute would not lead to a
shortage in the short term.

Even if some supplies were interrupted, it added, “the level of gas stocks
and supplies from other areas” would cover this.

President Putin has offered Ukraine credit worth $3.6bn to cover the
new gas cost but this was rejected by Kiev. -30-

GAZPROM’S 2006 TARIFFS PER 1,000 CUBIC METRES OF GAS
Ukraine: US$230; Belarus: US$47; Armenia and Georgia: US$110
Romania: US$280; Average EU charge: US$240
source: AP news agency

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3. FORMER TOP KREMLIN ECONOMIC ADVISER BLASTS RUSSIA’S NEW YEAR DEADLINE FOR UKRAINE GAS PRICE HIKE

Says demand was a sign of resurgent Russian imperialism
“Energy weapons are being used against neighbors.”

By Vladimir Isachenkov, Associated Press Writer
Moscow, Russia, Saturday, December 31, 2005

MOSCOW – A former Kremlin adviser denounced Russia’s New Year deadline for Ukraine to accept a massive gas price increase, saying Saturday the demand was a sign of resurgent Russian imperialism. Europe, meanwhile, warily watched the standoff amid warnings that its supplies could be affected.

Russia’s state-owned gas monopoly, OAO Gazprom, has threatened to cut supplies to Ukraine Sunday morning if Kiev does not agree to pay $230 per 1,000 cubic meters of gas – more than four times the current price. The company has said the price hike marks a long-overdue transfer to free-market price mechanisms.

However, Andrei Illarionov, a former economic adviser to Russian President Vladimir Putin, said the increase instead was a political move signaling the rise of neo-imperialist trends in Kremlin policy.

Illarionov said the Kremlin had asked him to help cast the price hike as a free-market measure, but that he resigned this week because the move “had no relation not only to liberal economic policy, but to economic policy at all.”

“Energy weapons are being used against neighbors,” Illarionov said on Ekho Moskvy radio. “The move toward a policy of imperialism … has a clear and high price that will eventually be paid by the citizens of a nation that embarks on the imperialist path.”

Russia supplies about half of the European Union’s gas, most of which flows through Ukraine. Gazprom informed European customers that, once it stops deliveries intended for Ukrainian use, supplies to other countries could be restricted if Kiev siphons off gas meant for transit further west, company spokesman Sergei Kupriyanov said.

Ukrainian President Viktor Yushchenko’s office said his Cabinet introduced measures to ensure the unhampered flow of gas into Ukraine and its transit to EU countries until a new contract was signed. But his prime minister has said Ukraine has the right to take 15 percent of shipments through its territory as transit fees.

EU Energy Commissioner Andris Piebalgs said he was concerned about the Russian threat, but was confident an agreement would be reached “and that Russia and Ukraine will honor their commitments to supply European gas markets as they have at all times in the past.”

The showdown has underlined the tension boiling between the historically linked, mostly Slavic ex-Soviet republics since Yushchenko won the presidency a year ago on the wave of the “Orange Revolution” protests against election fraud. It threatens to dominate the New Year holiday, a big one in both countries.

Ukraine wants any increase toward world-market prices to be phased in gradually, and Yushchenko said late Friday that his country could now pay $80 per 1,000 cubic meters at the most.

Yushchenko was speaking during his televised New Year’s address, which followed a carefully staged TV broadcast by Gazprom’s head who emphasized the company’s plans to shut off the valves on New Year’s Day.

“The actions will be precise and resolute,” said Alexei Miller, reiterating that the company would halt supplies to Ukraine at 10:00 a.m. Sunday unless a new contract was signed.

With no sign of progress toward a deal, Yushchenko proposed earlier Friday to freeze prices for the first 10 days of January to give both countries’ companies extra time to negotiate a deal.

Putin’s press service said the Kremlin had not received the tele gram containing the proposal, and there was no reaction from the Russian leader. But Gazprom criticized the proposal, saying that accepting it could lead to indefinite delays.

Illarionov said that in August 2004, Gazprom signed a deal with Ukraine’s gas company that envisaged five years of gas supplies at $50 per 1,000 cubic meters – part of the Kremlin’s efforts to support presidential candidate Viktor Yanukovych, who lost a tense race last fall to the Western-leaning Yushchenko.

“When the political situation changed, they remembered about subsidies,” said Illarionov, who long had been a dissenter in the Kremlin, which is dominated by Putin’s fellow veterans of the Soviet spy agency KGB.

Illarionov likened Russia’s price hike for Ukraine to Nazi and Soviet ultimatums issued to Eastern European nations before their annexation on the eve of the World War II, and urged the Kremlin to step away “from the brink of a precipice that we are approaching so blindly and quickly.” -30-

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3. FORMER TOP KREMLIN ECONOMIC ADVISER BLASTS RUSSIA’S NEW YEAR DEADLINE FOR UKRAINE GAS PRICE HIKE

Says demand was a sign of resurgent Russian imperialism
“Energy weapons are being used against neighbors.”

By Vladimir Isachenkov, Associated Press Writer
Moscow, Russia, Saturday, December 31, 2005

MOSCOW – A former Kremlin adviser denounced Russia’s New Year deadline for Ukraine to accept a massive gas price increase, saying Saturday the demand was a sign of resurgent Russian imperialism. Europe, meanwhile, warily watched the standoff amid warnings that its supplies could be affected.

Russia’s state-owned gas monopoly, OAO Gazprom, has threatened to cut supplies to Ukraine Sunday morning if Kiev does not agree to pay $230 per 1,000 cubic meters of gas – more than four times the current price. The company has said the price hike marks a long-overdue transfer to free-market price mechanisms.

However, Andrei Illarionov, a former economic adviser to Russian President Vladimir Putin, said the increase instead was a political move signaling the rise of neo-imperialist trends in Kremlin policy.

Illarionov said the Kremlin had asked him to help cast the price hike as a free-market measure, but that he resigned this week because the move “had no relation not only to liberal economic policy, but to economic policy at all.”

“Energy weapons are being used against neighbors,” Illarionov said on Ekho Moskvy radio. “The move toward a policy of imperialism … has a clear and high price that will eventually be paid by the citizens of a nation that embarks on the imperialist path.”

Russia supplies about half of the European Union’s gas, most of which flows through Ukraine. Gazprom informed European customers that, once it stops deliveries intended for Ukrainian use, supplies to other countries could be restricted if Kiev siphons off gas meant for transit further west, company spokesman Sergei Kupriyanov said.

Ukrainian President Viktor Yushchenko’s office said his Cabinet introduced measures to ensure the unhampered flow of gas into Ukraine and its transit to EU countries until a new contract was signed. But his prime minister has said Ukraine has the right to take 15 percent of shipments through its territory as transit fees.

EU Energy Commissioner Andris Piebalgs said he was concerned about the Russian threat, but was confident an agreement would be reached “and that Russia and Ukraine will honor their commitments to supply European gas markets as they have at all times in the past.”

The showdown has underlined the tension boiling between the historically linked, mostly Slavic ex-Soviet republics since Yushchenko won the presidency a year ago on the wave of the “Orange Revolution” protests against election fraud. It threatens to dominate the New Year holiday, a big one in both countries.

Ukraine wants any increase toward world-market prices to be phased in gradually, and Yushchenko said late Friday that his country could now pay $80 per 1,000 cubic meters at the most.

Yushchenko was speaking during his televised New Year’s address, which followed a carefully staged TV broadcast by Gazprom’s head who emphasized the company’s plans to shut off the valves on New Year’s Day.

“The actions will be precise and resolute,” said Alexei Miller, reiterating that the company would halt supplies to Ukraine at 10:00 a.m. Sunday unless a new contract was signed.

With no sign of progress toward a deal, Yushchenko proposed earlier Friday to freeze prices for the first 10 days of January to give both countries’ companies extra time to negotiate a deal.

Putin’s press service said the Kremlin had not received the tele gram containing the proposal, and there was no reaction from the Russian leader. But Gazprom criticized the proposal, saying that accepting it could lead to indefinite delays.

Illarionov said that in August 2004, Gazprom signed a deal with Ukraine’s gas company that envisaged five years of gas supplies at $50 per 1,000 cubic meters – part of the Kremlin’s efforts to support presidential candidate Viktor Yanukovych, who lost a tense race last fall to the Western-leaning Yushchenko.

“When the political situation changed, they remembered about subsidies,” said Illarionov, who long had been a dissenter in the Kremlin, which is dominated by Putin’s fellow veterans of the Soviet spy agency KGB.

Illarionov likened Russia’s price hike for Ukraine to Nazi and Soviet ultimatums issued to Eastern European nations before their annexation on the eve of the World War II, and urged the Kremlin to step away “from the brink of a precipice that we are approaching so blindly and quickly.” -30-

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