2. CLOCK TICKS AWAY ON UKRAINE’S GASBBC NEWS, United Kingdom, Saturday, December 31, 2005

BBC NEWS, United Kingdom, Saturday, December 31, 2005

Time is running out for Ukraine to strike a price deal to avert Moscow’s
threat to begin the New Year by turning off gas supplies to its neighbour.
Russia’s Gazprom, which provides 30% of Ukrainian gas, wants to replace
the current barter system with market rates for gas and pipeline transit
fees.

The four-fold price hike is unacceptable to Ukraine – the main route for
Russian gas to the West. Both sides show no sign of relenting before the
0700 GMT Sunday deadline.

Ukraine’s pro-Western President, Viktor Yushchenko, went on national
television networks on Friday evening to defend his position, saying he
hoped that his personal good relations with his Russian counterpart,
Vladimir Putin, would resolve the dispute.

His appeal earlier in the day for a 10-day stay of execution was rejected
immediately by Gazprom.

The company has invited Russian TV cameras to its headquarters in

Moscow to broadcast the gas supply shutdown live in special news
bulletins on one of the biggest holidays in the former Soviet Union.

Many in Ukraine believe Russia’s moves are politically designed to
manufacture a crisis over energy supplies, the BBC’s Damian

Grammaticas reports from Moscow.

They believe Mr Putin wants to punish Ukraine for its so-called Orange
Revolution and moves to join the European Union and Nato, leaving
Russia’s sphere of influence, our correspondent adds.
‘HUMILIATING’
Ukrainian gas industry officials have said the country’s heating needs over
the harsh winter can be met from domestic production but supplies to
industrial customers may have to be reduced.

Justifying his rejection of the Russian price hike, Mr Yushchenko said that
he did not want to believe Russia was using gas as a lever to put pressure
on his country. “That frankly humiliates us as a negotiating partner,” he
said.

However, Gazprom, he argued, was varying the price of its gas according to
customer and he contrasted the $47 Belarus – a close ally of Moscow – would
be expected to pay per 1,000 cubic metres with the $230 being asked of
Ukraine.

“A price of $230 is unacceptable not because it is high but because there
are no economic grounds for it,” he said.

Adding to the pressure, former Prime Minister Yulia Tymoshenko – a leading
figure in the Orange Revolution – said that anyone who agreed to the new
market prices would be a “traitor to Ukraine”.

Ukraine, which currently pays $50 per 1,000 cubic metre, has said it is
prepared to phase in world prices gradually and can only raise its payment
to about $80 for now.

It links this figure to Gazprom’s offer to raise the pipeline transit fee it
now pays – $1.09 per 1,000 cubic metre per 100km – to about $1.8.
Ukraine has been asking for at least $2.
‘NO DISRUPTION’
Russian gas is expected to fetch on average about $240 in the European
Union next year, according to analysts.

Gazprom said it had a “detailed plan” in place to ensure gas supplies
transiting Ukraine would not be disrupted, and said any attempt by
Ukraine to siphon off gas would be “theft”.

With Russia supplying about a fifth of the EU’s gas, the European
Commission said it was “confident” the dispute would not lead to a
shortage in the short term.

Even if some supplies were interrupted, it added, “the level of gas stocks
and supplies from other areas” would cover this.

President Putin has offered Ukraine credit worth $3.6bn to cover the
new gas cost but this was rejected by Kiev. -30-

GAZPROM’S 2006 TARIFFS PER 1,000 CUBIC METRES OF GAS
Ukraine: US$230; Belarus: US$47; Armenia and Georgia: US$110
Romania: US$280; Average EU charge: US$240
source: AP news agency

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