3. UKRAINE AGREES ON LIBERALIZATION OF PRICES FOR GAS

BUT WITHIN ACTIVE INTERNATIONAL NORMS,
PM YEKHANUROV REPORTS ON HIS RETURN TO KYIV

Ukrinform, Kyiv, Ukraine, Monday,
December 19, 2005
KYIV – During Monday negotiations in Moscow, Russia, Ukraine agreed
on liberalization of prices for gas, but within active international norms,
Prime Minister Yuriy Yekhanurov told journalists on his return to Kyiv.

According to the Ukrainian Premier, the two sides stated their readiness to
gradually shift to a new formula of calculating the price for gas and its
transit. “Unfortunately, neither NaftoGaz Ukrainy nor GazProm offered such
formula. Personally I have an impression there is no such formula”, Yuriy
Yekhanurov said.

With a view of drafting such a formula, Deputy Chairman of the national
joint-stock company NaftoGaz Ukrainy Ihor Voronin left in Russia to adjust
al the issues on the level of experts.

As the Prime Minister said, the story is not about refusal from the
contract, but about its certain correction. As the Prime Minister noted, the
Russian side is ready to take the active contract as the basis. As Premier
Yekhanurov stated, while the old contract exists, Ukraine views it as active
and it suites Ukraine with all its additions. “No conditions change and all
the agreements are in effect. But the matter of the new formula will be
considered”, the Ukrainian Premier noted

As he said, the new formula of the price will envisage the active European
model “transport or pay”, to which end certain technical alterations are
needed, which will take some time. According to him, Ukraine is ready for
shifting to the new system, but technological time is needed. “When
agreements on new pricing formula are reached, then we may talk about
gradual transition to new prices, or to completely new price”, Yuriy
Yekhanurov said.

As the Ukrainian Premier specified, during the Monday negotiations in
Moscow, the topic of using the Ukrainian gas transportation system was not
discussed. This issue was mentioned during the negotiations with Russian
Minister for Industry and Energy Viktor Khristenko in the context of
reliability of supplies of gas to Europe, but the issue of giving Russia the
part of the “Ukrainian pipe” was not directly touched. -30-

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