Ukraine: Another Gas War With Russia Could Loom

Yuliya Tymoshenko (file photo) (ITAR-TASS) Russia's gas giant Gazprom has denounced calls by Yuliya Tymoshenko -- who is expected to become Ukraine's prime minister -- to review the contentious gas deal that raised the price Ukraine pays for Russian gas supplies. Gazprom said reopening the deal, which was inked in January after Russia cut off gas supplies to Ukraine, could spark a new energy crisis in Europe. However, there seems to be consent among Ukrainian politicians that the deal has to be renegotiated.

PRAGUE, June 23, 2006 (RFE/RL) -- Yuliya Tymoshenko is intent on seeing that Ukraine's contentious gas deal with Russia undergoes a meticulous review.

And the likely prime minister wasted no time in voicing her intentions on June 22 to the Ukrainian parliament -- just as the members of the revived Orange coalition were signing their agreement to form a new government.

"All the relations on gas supplies to Ukraine now require further deep revision and review. And, of course, we must build new agreements on a friendly basis with the Russian Federation, Turkmenistan, Uzbekistan, and Kazakhstan," Tymoshenko said.

The June 22 agreement by the Yuliya Tymoshenko Bloc, Our Ukraine, and the Socialist Party ended nearly three months of political paralysis.

Original Deal

Ukraine's gas deal with Russia was reached in January, after the original Orange coalition had split and Tymoshenko had been ousted as prime minister by President Viktor Yushchenko. After Russia had cut off gas supplies during one of the coldest winters on record, Ukraine agreed without the consent of its parliament to pay $95 per 1,000 cubic meters.

The deal incurred the wrath of many lawmakers and business representatives upset over the $45 per 1,000-cubic-meter increase, and the fact that the deal left open the possibility of a further price hike as soon as next month.

Gazprom allowed for this possibility in the event Turkmenistan were to increase the price it charges for gas it exports to Russia. Much of the imported Turkmen gas is shipped by Gazprom to Ukraine, through an arrangement with RosUkrEnergo, a gas-trading company controlled by Gazprom.

Gazprom Reaction

Gazprom's reaction to Tymoshenko's statement was swift, and followed on last week's announcement by Turkmenistan that it indeed plans to increase its gas prices. Gazprom spokesman Sergei Kupriyanov told reporters on June 22 that Ukraine might be heading toward a "new gas crisis."

"We are very concerned about today's statement by Yuliya Tymoshenko on the revision of a gas deal with Russia. It is an alarm bell ringing for Europe. I would like to remind you that the agreements signed in January included a deal on transit, as well," Kupriyanov said. "This is the document that rules the gas supplies to Europe. Any carrying out of the threat sounded today in Ukraine is a road to a new gas crisis. Yuliya Tymoshenko's words show again that Ukraine is the weakest link in the chain of supplying Russian gas to Europe."

The current price Ukraine pays for Russian gas takes into account transit fees Gazprom pays for using Ukrainian pipelines to transit gas to Western Europe.

Aleksandr Medvedev, Gazprom's deputy CEO responsible for exports, described the situation as "worrying," but Tymoshenko is not alone in her belief that the deal needs to be reviewed.

Yury Yakymenko, an analyst for the Oleksandr Razumkov Center for Economic and Political Studies in Kyiv, says there is agreement among many of Ukraine's politicians that the deal is unfair: "There is an opinion among Ukrainian politicians that there is something wrong with these deals. This attitude is shared by Western partners of Ukraine, namely by the United States. We can expect a kind of revision of these agreements. It is not clear what the results and consequences will be. It is difficult to judge. However, I think it [Tymoshenko's position] might be supported by the present coalition."

Yakymenko says it is too early to say if new negotiations could lead to a renewed "gas war" that would threaten not only Ukraine's economy but also Russian energy supplies to Europe.

Gazprom said before agreeing to the current deal that the price Ukraine pays for gas should be at the level of that paid by Western European countries -- about $190 to $220 per 1,000 cubic meters.

Gazprom announced yesterday it plans to raise gas prices for Moldova, Ukraine's neighbor, from the current $110 per 1,000 cubic meters to $160.