2. UKRAINE-RUSSIA GAS-PRICE DISPUTE DEEPENS

By Aleksandar Vasovic, Associated Press (AP)

Kiev, Ukraine, Friday, December 30, 2005

KIEV — Ukraine dug in its heels in a bitter dispute with Russia over gas
deliveries, with President Viktor Yushchenko rejecting Russian President
Vladimir Putin’s offer of a multibillion-dollar loan to help Kiev adjust to
a huge increase in Moscow’s price tag for its gas.

With Russia threatening to stop selling gas to Ukraine on New Year’s Day if
no solution is found, Ukraine’s state-run gas company said the nation’s 48
million people won’t freeze and its factories won’t go dark if Moscow
follows through on the threat.

At a second day of talks in Moscow, Russian authorities stuck by their
demand that Ukraine pay more than four times the current price, and no
agreement was reached. The negotiations were to resume today.

Meanwhile, Russia tightened the screws by signing a deal to purchase gas
from Turkmenistan that analysts said would leave the Central Asian nation
with less to sell to Ukraine — which relies on Russia for about a third of
its gas and Turkmenistan for 45%.

The dispute has further damaged relations between Russia and Ukraine, two
mostly Slavic, Orthodox Christian ex-Soviet republics whose common history
goes back centuries but whose ties have been strained by the ascendancy of
the Westward-leaning Mr. Yushchenko a year ago.

Russia’s state-run natural-gas monopoly OAO Gazprom says it will halt gas
sales to Ukraine Jan. 1 unless Kiev agrees to pay about $230 per thousand
cubic meters — up from the $50 it pays now.

“This is a price that Ukraine will never accept,” the ITAR-Tass news agency
and Russia’s NTV television quoted Mr. Yushchenko as saying yesterday.
According to ITAR-Tass, he added that the Russian price was “a
provocation.”

Ukrainian officials say they want a price increase phased in gradually and
say the sudden huge increase would cripple the steel and heavy industries
that are key components of the country’s economy. -30-

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