5. UKRAINIAN POPULATION PAYS THE LOWEST PRICE FOR GAS IN EUROPE

ITAR-TASS, Kiev, Ukraine,
Monday, Dec 19, 2005

KIEV – The Ukrainian population pays the lowest price for gas in Europe,
namely, thirty-six U.S. dollars per thousand cubic metres. It costs more
even in Russia – forty-four U.S. dollars for the same amount of gas, the
Kiev “Inter” TV reports. It has devoted a separate program to the
upcoming talks between the prime ministers of the two countries, which
are to begin in Moscow on Monday.

The Poles and the Moldovans, who are Ukraine’s neighbours, pay 223 and
112 U.S. dollars respectively per thousand cubic metres of gas, and the
population of the West European countries – an average of 523 U.S. dollars.

It is worth noting, the TV pointed out, that “Kiev had itself offered last
spring to go over to market prices, but began to backpedal shortly
afterwards”. Ukraine is ready to go over to European prices, but gradually
so as to give the Ukrainian industry and the communal sector sufficient
time to introduce energy-saving technologies, and the population — to get
used to thrifty gas consumption, the “Inter” quotes Ukrainian politicians
and economists as saying.

Minister for Industrial Policy Vladimir Shandra stated that “cheap gas
cannot prompt the enterprises to use energy-saving technologies”. In expert
opinion, up to forty billion hryvnas, i.e. eight billion U.S. dollars, and
from three to five years will be needed to re-equip the industry.

“Metallurgy will have to seek money for this purpose from its own funds
or to take credits. The state will not subsidize business, but will most
likely revise the taxes,” the minister stated. “The situation in the
chemical industry is even more difficult, but it, too, will be able to use
barter deals during the first three years – gas in exchange for
commodities,” Shandra added.

Minister of Fuel and Energy Ivan Plachkov believes the Ukrainian premier
will advocate during his negotiations in Moscow a phased transition period
from 2006 to 2009, and complete transition to the new form of relations as
of 2010. Otherwise, many economists believe, “the profitability of the
country’s main exporters – metallurgy and chemical industry – will be
reduced to zero” if the cost of gas tops 100 U.S. dollars, since Ukraine
has the world’s most energy-consuming GNP.

The Ukrainian TV had broadcast statements on “the Kremlin blackmail”
throughout last week without caring to explain why the demand to honestly
pay for the gas it consumes is regarded as blackmail in Ukraine, which is
now a market-economy country. -30-

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