PMs of Ukraine and Russia discuss energy problems (11/26/00)

PMs of Ukraine and Russia discuss energy problems

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Ukraine's Prime Minister Viktor Yuschenko returned from a one-day visit with his Russian counterpart in Moscow on November 17 with much negotiating behind him but no resolution of the vexing gas supply problem that has caused tension between the two governments in recent months.

The two sides announced they had agreed on a broad outline that with some massaging would resolve the main problems in their energy relations, including the alleged, non-approved diversion of Russian natural gas through the Ukrainian pipeline. Russia recently again accused Ukrainian sources of stealing natural gas meant for the West, even though Kyiv has said several times that all such illegal practices were halted before the summer. In the past Moscow has said that Ukraine has taken as much as 10 billion cubic meters annually without notification.

The two prime ministers scheduled further talks for November 30 in Miensk, which, if successful, would lead to the formal signing of a natural gas agreement on December 15.

Mr. Yuschenko implied during a press conference in Moscow that Ukraine looks askance at the Russian effort to make Ukraine appear a thief, according to Interfax. While stating that Ukraine has pursued an honest "transit policy" for the natural gas that flows through its pipeline, he underscored that the lack of agreements between the two countries may be the real source of the misunderstanding on natural gas routing.

"The volume of gas supplies in 2000 has not been stipulated, and no agreements to that effect have been concluded," explained Mr. Yuschenko. "Therefore, any consumption of gas may be considered unauthorized."

He said that it is a problem that needs to be resolved at the legal level.

The Ukrainian prime minister promised, however, that every effort would be made to prevent the re-export of Russian gas from Ukraine. Ukrainian traders, including some accused of stealing the Russian natural gas that flows in the Ukrainian pipeline, have resold the cheaper Russian product in markets abroad, reaping windfall profits.

Russian Prime Minister Mikhail Kasianov said one measure that has been proposed is to level an export duty sufficiently high so as to make exports "unattractive."

In another move to show that the sides are cooperating in resolving their differences in the energy sector, the Russian prime minister reassured Ukraine that the Turkmen gas it has purchased would be transported through Russian pipelines.

The two sides also discussed the controversial plan to circumvent the Ukrainian natural gas pipeline that currently brings Russian natural gas to Western Europe by developing another pipeline that would traverse Belarus before moving through Poland and Slovakia. A consortium of European gas suppliers led by the Russian monopoly Gazprom recently proposed the route as an alternative to moving natural gas through Ukraine. The idea gathered steam after the latest Russian accusation that Ukraine continues to steal its energy resource indiscriminately.

Continuing to maintain that the Ukrainian pipeline is the best choice, Mr. Yuschenko explained that the development of an alternate natural gas pipeline is not feasible, if only from an economic standpoint. He explained that Ukraine's pipeline transports only about 115 billion to 120 billion cubic meters of gas annually, although it has a capacity of 170 billion, while the one that goes to Germany carries only about 9 billion cubic meters, although it has a capacity of 20 billion cubic meters.

"First of all, we need to find answers on capacity utilization in the European system and then move on to the issues that surround the question of construction of additional pipelines," remarked Mr. Yuschenko.

The most perplexing issue the two prime ministers discussed, one that remains a persistent thorn in relations between Moscow and Kyiv, is Ukraine's energy debt to Russia. Haggling over the current debt account has been a centerpiece of their recent foreign economic relations.

In Moscow, Mr. Yuschenko put the latest figure at $1.36 billion, which he said includes main and verified data along with penalties, for the period 1998-2000.

However, Rem Viakhirev, chairman of Gazprom, has estimated the Ukrainian debt at more than $2 billion. The numbers diverge at the point where the money owed by Ukrainian private interests is included in the government figure. Ukraine has insisted that it will not take responsibility for the lax financial procedures of its private companies.

Although Mr. Kasianov offered Ukraine an inviting eight-year period of grace in its repayment of the debt, he admitted the sides are at odds over a larger, more general issue: the specific blueprint and form of the debt restructuring. He did not seem ready to budge on the issue of who ultimately must pay for the financial delinquencies of the Ukrainian private sector.

"We insist that it be formulated as a state debt, however Ukraine sees other ways in which to formulate it," explained Mr. Kasianov.

The Russian prime minister refused to specify the amount of money owed by Ukrainian companies, which he said he did not discuss with his Ukrainian cohort. However, he pledged to take into account Ukraine's financial problems when dealing with the issue of repayment.

"We are not too worried by the figure, the main thing for us is to find ways in which to settle the accumulated debt," explained Mr. Kasianov.

The Russian prime minister also said he was ready to supply Ukraine with additional amounts of gas, and also on credit.

Next year Ukraine is scheduled to receive 30 billion to 32 billion cubic meters of gas from Russia and 30 billion from Turkmenistan. The country expects to produce about 18 billion cubic meters of its own natural gas.

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