Ukraine Gives Russia Ultimatum on Gas Deal

Posted September 1st, 2011 at 5:35 pm (UTC-5)
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Ukraine has given Russia a final chance to resolve a dispute over exporting less natural gas to Ukraine.

Ukrainian Prime Minister Mykola Azarov said in a speech Thursday that his government will make one more attempt with Russian officials to reach a long-term agreement. He said if this does not happen, the responsibility for the consequences will lie with leaders who refused to hear Kyiv's arguments.

Azarov spoke in response to the criticism by Russian President Dmitry Medvedev, who accused Ukraine Wednesday of asking for favors and offering nothing in return. He said in exchange for lower gas prices Ukraine must join a Russian-led customs union, which also includes Kazakhstan and Belarus. Russia also wants Ukraine to sell a part of its state energy company to Russia's Gazprom.

Azarov said Ukraine is not seeking any discounts. He also said Kyiv could not join the customs union with Russia because it would mean revising the agreements with all of its partners in the World Trade Organization.

Ukraine imports most of its energy from neighboring Russia and now wants to cut Russian gas imports by one third. It also wants to charge Moscow a higher fee for Russian gas sent through Ukraine to the European Union.

In another attempt to reduce its dependence on Russian energy, Ukraine Thursday signed a new agreement with the Dutch giant Shell to develop reserves of shale gas.

Under the deal, which revises an agreement signed in 2006, Shell will drill wells in Ukraine's rock formations to see if they contain gas reserves.

Russia pumps the majority of its gas exports to Europe through Ukraine. But Moscow has suspended deliveries several times in recent years during pricing disputes with Kyiv. The disputes have interrupted Russian gas supplies to many European countries during cold winter months.

Gazprom is the world's largest natural gas extractor and Russia's largest company. The firm has a monopoly over Russia's pipelines and fuel exports.

Russia is planning to develop another pipeline via the Baltic Sea to bypass Ukraine.