Ukraine says it must reach a new agreement on the price it pays Russia for natural gas because of its plans to break up its national energy company, voiding the previous contracts.
Ukrainian Prime Minister Mykola Azarov said Friday that the Naftogaz company, which signed the 10-year agreement with Russia’s monopoly Gazprom in 2009, will be restructured into several different companies, forcing the old agreement to be revised.
In a speech Thursday, Mr. Azarov said his government will make one more try to reach a long-term agreement with Russia. He said if it does not happen, responsibility for the consequences will lie with leaders who refused to hear Kyiv’s arguments.
Mr. Azarov was speaking in response to criticism Wednesday from Russian President Dmitry Medvedev, who accused Ukraine of asking for favors and offering nothing in return.
The prime minister 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.
In exchange for lower gas prices, Russia wants Ukraine to join a Russian-led customs union, which also includes Kazakhstan and Belarus. Russia also wants Ukraine to sell a part of Naftogaz to Russia’s Gazprom.
Ukraine and Russia have been at odds over gas prices for three years, with Ukraine saying that a 2009 contract signed by former prime minister Yulia Tymoshenko was illegal and ruinous to the country’s economy.
The contract ended a price war that had caused Russia to cut off gas supplies to Ukraine. Russia pumps the majority of its gas exports to Europe through Ukraine. But Moscow has suspended deliveries several times in recent years during such pricing disputes with Kyiv, leaving many European countries without gas supplies during cold winter months.
In the past, Russia sold gas to Ukraine at subsidized prices to help ensure good diplomatic relations with the former Soviet Republic. But Russia says it now must raise those prices to keep its own economy healthy.
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 Europe.
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.
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.
