11. PUTIN OK’S 1Q GAS PRICE DEAL WITH UKRAINE IF UKRAINE AGREES TO PAY MARKET PRICES THEREAFTER

Putin said his offer was only valid until the end of Saturday.


By Vladimir Sachenkov, Associated Press (AP)

Moscow, Russia, Saturday, December 31, 2005

MOSCOW – President Vladimir Putin offered Ukraine an 11th-hour deal
Saturday in a war of nerves over Moscow’s gas-supply ultimatum, ordering
Russia’s state-owned natural gas monopoly to maintain Ukraine’s current fuel
price for three months if Kiev agrees to pay more thereafter. Putin said his
offer was only valid until the end of Saturday.

There was no immediate indication of whether Ukraine, which faces Russia’s
threat to cut off supplies at 0700 GMT Sunday, would accept the deal.

Valentyn Mondriyevsky, a Ukrainian Cabinet spokesman, said that talks were
under way. “Both sides will have to negotiate the exact prices,” he said,
according to Interfax and other news agencies.

Gazprom (GSPBEX.RS) has demanded that Ukraine pay $230 – more than
four times the current price of $50 – per 1,000 cubic meters of gas.

“I’m ordering the government and Gazprom to conduct gas supplies to Ukraine
in the first quarter of 2006 on terms and at prices of 2005, if Ukrainian
partners by the end of the day sign a contract proposed by Gazprom to
transfer to free-market prices starting from the second quarter,” Putin said
during a session of the presidential Security Council.

“If there is no clear response, we will consider that our proposal has been
rejected.”

Gazprom spokesman Sergei Kupriyanov said that Ukrainian negotiators left
Moscow on Friday, and that his company was ready to wait for them through
the end of the day to sign the contract.

Ukraine’s president, Viktor Yushchenko, had proposed on Friday to freeze
prices for the first 10 days of January to give both countries’ companies
more time to negotiate. The Kremlin had not reacted to the proposal.

Putin said he had discussed the gas situation earlier Saturday in a
telephone conversation with Yushchenko. The Russian leader cast his move
as a friendly gesture intended to help the Ukrainian people.

“Ukraine isn’t some abstract leadership, Ukraine is not oil and gas barons
who will protect their corporate or private interests in any case,” Putin
said. “Ukraine is, above all, brotherly Ukrainian people and we must think
about the entire complex of relations between Russia and Ukraine.”

“All problems can be solved through market approach, and, therefore through
a price Ukraine can afford,” Yushchenko said in remarks broadcast by the
TV5 station later Saturday. He didn’t elaborate. -30-

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