ANALYSIS: Sochi gas talks fall short on concrete price formulas (09/03/06)

ANALYSIS

Sochi gas talks fall short on concrete price formulas

by Jan Maksymiuk
RFE/RL Belarus, Ukraine and Moldova Report

Ukrainian Prime Minister Viktor Yanukovych recently announced that Russia and Ukraine have agreed to keep the current gas price for Ukraine until the end of 2006.

He also said that he and Russian Prime Minister Mikhail Fradkov have agreed to base the price of gas on market principles, but he left observers guessing about the price Ukraine will have to pay for imported gas in 2007.

Meeting on the sidelines of an informal summit of the Eurasian Economic Community hosted by Russian President Vladimir Putin in Sochi on August 16, Messrs. Yanukovych and Fradkov seemed pleased with each other. But Mr. Yanukovych was enigmatic about the price of gas for Ukraine - the main topic of the talks.

"The [gas] price will be market-based, of course, but the mechanism of its formation will be transparent and certainly adequate to the level of economic relations between Ukraine and Russia," Mr. Yanukovych told reporters on August 16.

It is not clear what he had in mind by linking prices to "the level of economic relations," although some observers speculate that it could suggest greater Ukrainian involvement in the formation of a post-Soviet Single Economic Space, an idea championed by Russia, Kazakhstan and Belarus.

Mr. Fradkov also linked the price of gas in part to "the prospects of developing our cooperation in the future in the field of gas and other sectors of the economies of our countries."

As for this year, though, Mr. Yanukovych was insistent. The price of imported gas would not exceed the current level of $95 per 1,000 cubic meters. Since Gazprom nominally charges $230 per 1,000 cubic meters of Russian gas for Ukraine, while Turkmenistan sells its gas to Gazprom at $65 per 1,000 cubic meters, the current price of $95 means that the share of Russian gas in the Russian-Turkmen mix supplied to Ukraine does not exceed 20 percent.

Mr. Yanukovych appeared to suggest in Sochi that there will be no steep rise in 2007. Without giving details, he said that he and Mr. Fradkov had established "the price parameters" for gas supplies in the coming year. Mr. Fradkov also was vague. "We have a clear desire to find solutions to all of the difficult issues [between Russia and Ukraine], but we must be guided by a market approach and by a willingness to clarify the prospects of developing our cooperation in the future in the field of gas and other sectors of the economies of our countries," he said.

This may mean that Moscow is in no hurry to reward Mr. Yanukovych - whose political comeback this year is widely perceived as a triumph of the pro-Russian forces in Ukraine - with preferential terms in gas supplies.

Energy expert Volodymyr Saprykin of the Razumkov Center in Kyiv believes Mr. Yanukovych's visit to Sochi had more of a ceremonial than a practical character. "A visit is significant if it is followed by the signing of a number of documents," Mr. Saprykin said. "No document has been signed. And the statements were very cautious. We have not heard any confirmation by the Russian side that the price of gas for Ukraine will actually remain unchanged until the end of this year."

So, is Moscow reassessing Mr. Yanukovych, the man it supported so firmly during his first term as prime minister in 2002-2004?

Before becoming prime minister earlier this month, Mr. Yanukovych signed the "Universal of National Unity" with President Viktor Yushchenko, in which he promised to maintain Ukraine's course of integration with the West and abandoned his election pledge to give Russian the status of official language in Ukraine.

When asked in Sochi about the status of Russian, Mr. Yanukovych said the ruling coalition will return to the issue as soon as it gains a constitutional majority (300 votes) in the 450-seat Verkhovna Rada. Given the current alignment of forces in the Ukrainian Parliament, this is unlikely to happen soon.

Lawmaker Yurii Kliuchkovskyi from Our Ukraine told RFE/RL that Mr. Yanukovych will be under close scrutiny by allies and opponents alike. "[Yanukovych's statement in Sochi on the Russian language] was either a renunciation of the declaration of national unity or an attempt to fool everyone else," Mr. Kliuchkovskyi said. "I hope he realizes very well that this will not happen."

In other words, Russian gas supplies to Ukraine in 2007 are unlikely to be a purely economic issue. As so often in the past, the problem will almost certainly involve a wide range of other concerns, linked to Ukraine's political, historical and linguistic choices and preferences.

Tetyana Yarmoshchuk of RFE/RL's Ukrainian Service contributed to this report.

Jan Maksymiuk is the Belarus and Ukraine specialist on the staff of RFE/RL Newsline.

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