RIA Novosti, Moscow, Russia,
Monday, December 19, 2005

MOSCOW – Russian energy giant Gazprom said Monday that it was
moving away from fixed pricing of its natural gas exports to Ukraine
toward a price regime based on world oil prices.

“Next year, we’ll be using not some specific figure, but a pricing formula,
one fully consistent with the formulas we employ in working with countries
of eastern and western Europe,” the Gazprom CEO’s official spokesman,
Sergei Kupriyanov, said in a radio interview. “We will rely on the same
parameters related to the price of alternative fuels.”

He said the price of gas for Ukraine would now be determined in accordance
with the price of crude oil and oil products on global commodity markets.

Speaking of Gazprom’s interest in gas distribution networks, Kupriyanov
said the issue of setting up a consortium to operate Ukraine’s pipeline
networks had been essential to coordinating the terms of work in the gas
sector in 2004 and 2005.

“However, as we can see, no headway has been made on the issue. Although
the topic remains quite relevant to us,” he said. Moscow and Kiev have
been locked in a dispute over gas prices and transit that has intensified in
the last week.

Ukraine wants Russia to stick to a deal signed three years ago to provide
gas at prices of $50 per 1,000 cu m in lieu of pipeline transit fees for
Gazprom’s gas supplies to Europe. Gazprom is willing to pay higher transit
fees, but wants Kiev to pay the European-level of $220-230 per 1,000 cu m.

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