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Tom Nicholls: Ukraine to settle gas debt, says Gazprom

Ukraine will settle $1.3 billion in unpaid gas bills owed to Gazprom by 1 November, the Russian gas monopoly said in a statement today. The announcement follows meetings at Gazprom’s Moscow headquarters between Gazprom’s chief executive, Alexey Miller, and Ukraine’s energy minister, Yuri Boyko. “The parties agreed that the Ukraine government of the day regained control over the current problem and its resolution with the view of the debt repayment by 1 November 2007,” a Gazprom statement said.

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Yuri Boyko saves the day

Yesterday, Gazprom threatened to cut gas flows to Ukraine if the debt was not paid off by the end of this month. It is unclear where in the gas-supply chain the non-payment issue has arisen, but, according to Gazexport, RosUkrEnergo [the intermediary through which Gazprom sells Central Asian gas to Ukraine] seems to be suffering from “a long chain of internal non-payments” within Ukraine. Kyiv’s decision to step in will be welcomed by the European Union, whose gas supplies from Russia could be affected by any cessation in Russian exports to Ukraine – if consumers in Ukraine were to resort to stealing gas from the transit pipeline that sends Russian gas to Europe via Ukraine to make up for any shortages in Russian deliveries. When Gazprom shut off exports to its neighbour for just over a day in January 2006 – in a dispute over gas pricing often referred to as the gas war – pressure in transit pipelines feeding Europe dropped. However, there may yet be another ratcheting-up of tensions between Ukraine and Russia if – as the exit polls suggested – pro-Western parties are confirmed as having won last weekend’s parliamentary elections. For now, the main Moscow-backed party has refused to concede defeat and an investigation into alleged vote rigging in the pro-Russian east has been launched. But if Yulia Tymoshenko, Ukraine’s firebrand opposition leader and one of the Orange Revolution’s leaders, succeeds in forming a government at the expense of the Kremlin’s favoured candidate, Viktor Yanukovych, energy relations are likely to come under renewed strain and Ukraine may be asked to pay higher prices for gas supplied through Russia. Tymoshenko’s last stint as prime minister in 2005 was marked by trade wars with Russia, she is critic of the 2006 agreement that ended the gas war and wants to see RosUkrEnergo removed as the gas-sales intermediary. “Gazprom may use a potential change in government and the decision to eliminate RosUkrEnergo’s role as an excuse to hike prices for Ukraine,” says Global Insight energy analyst Andrew Neff. Before the election, he points out, Russia’s ambassador to Ukraine, Viktor Chernomyrdin, was quoted by Interfax as saying that the price of gas Ukraine is offered by Russia in 2008 “will depend on who comes to the government and how they handle the talks”.