Dreams of lost time

Yanukovych visiting Fradkov and Miller

The prime ministers of Russia and Ukraine, Mikhail Fradkov and Viktor Yanukovych, are trying with all their might to make up for the “failure” in bilateral relations. Having met on Friday at the White House on Krasnopresnenskaya embankment, the heads of the two governments in unison complained about lost time. “When coordination was interrupted, negativity immediately appeared,” noted Mr. Fradkov. “And now we are only at the beginning of the resumption of cooperation.” “We need to compensate for the time,” Mr. Yanukovych echoed, “those two years when the intergovernmental commission did not meet.” The head of the Ukrainian government was clearly hinting at the premiership of Yulia Tymoshenko that had unsettled him. And at the same time he poured balm on the wounds of his Russian colleagues, starting from Mr. Fradkov and ending with the head of Gazprom, Alexei Miller.

In general, gas (or rather, Ukraine’s gas balance for the fourth quarter of 2006 and the next three years) was, as usual, the central topic at the negotiations. Everything else is an application. The prime ministers consulted for almost three hours instead of the allotted hour and went to the press without a ready-made decision, but, as they put it, “with a full understanding” of it. However, the specific price at which Ukraine will purchase Russian gas was again not named.

“Without directly answering what the price will be, I would not like to anticipate the wishes of my partner, namely Ukraine’s need to leave prices the same,” Mr. Fradkov explained his silence. And Mr. Yanukovych voiced his already well-known position: “The increase in gas prices in 2006 is not provided for in our budget. And therefore, by the end of the year, the price of $95 per thousand cubic meters is fundamental for us. Although we understand that it is difficult.” But the Ukrainian prime minister was somewhat disingenuous. He knows that keeping the price at $95 is not just difficult, but extremely difficult.

At the August negotiations with Mr. Fradkov in Sochi, Mr. Yanukovych was ready to pay $110 per thousand cubic meters of gas for the remaining three months. But today even this price seems unlikely. Due to the intervention of Turkmenbashi. It was the third party that baffled the prime ministers of Ukraine and Russia. “The Turkmens have determined a gas price that is significantly higher than the previously planned one. And in the next few days we will have to find a compromise,” the Russian prime minister was clearly not happy about what happened.

He planned, according to sources in the Russian delegation, to sign an agreement on gas prices by the end of 2006 on Friday. And the contract for the next three years is due in October. However, the game of Gazprom, which in early September quickly agreed to Turkmenbashi’s new price request ($100 per thousand cubic meters instead of $65), complicated the negotiation process. Now the economically justified price of Turkmen gas on the border of Russia and Ukraine is no less than $135-$137, and Mr. Yanukovych stubbornly insists on continuing supplies at $95 until the end of the year.

Not a word was said about the prospects for Ukraine’s participation in joint gas production in Russia and third countries (most likely because objectively there are no such prospects), although in an interview with ITAR-TASS prior to the trip, Viktor Yanukovych promised to raise this issue with his Moscow counterparts.

But at the same time he started talking about returning to last year’s formula for work in the gas sector - namely, linking the conditions of gas supplies with the conditions of transit. As you know, Gazprom considers the division of contracts for the sale of gas to Ukraine and the transportation of Russian gas to Europe to be the main achievement during the winter “gas war” with Kiev. The agreement dated January 4 states that gas supplies are carried out by the Swiss trader RosUkrEnergo (a joint venture of Gazprom and entrepreneur Dmitry Firtash), the transit agreement is concluded by Gazprom and Naftogaz for five years with a constant rate of $1.6 per thousand cubic meters per 100 km. “The price of gas was divorced from the tariff; it was like two separate contracts, unrelated. This was a mistake on the part of Ukraine in 2006. We still must agree and harmonize both tariff and pricing policies,” Mr. Yanukovych said on Friday in an interview with the Rossiya TV channel. However, there is practically no chance that Gazprom will give up its gains on January 4.

Mikhail Fradkov did not deny himself the pleasure of reproaching his colleague that, by and large, the Ukrainian leadership itself is to blame for its problems. The Russian prime minister reminded several times that the price of gas was previously “packed” into a package agreement. He also mentioned that Russia is still keeping its ambitions in the shadows: both in relation to the work of the gas consortium and in relation to investments in Ukrainian industry, in particular in metallurgy. “We are returning to a set of issues. If the integration is close, then we are not going to bypass anyone,” explained the head of the Russian government, hinting at the construction of alternative gas pipelines. “But today we understand that the issues, if not packaged, are at least balanced,” concluded Mikhail Fradkov.

At the end of his conversation with the press, Mr. Yanukovych grabbed Mr. Fradkov by the elbow, took him aside and whispered something tensely in his ear for about three minutes. Although the Russian prime minister was not averse to whispering, he nevertheless began to hurry his colleague in order to quickly transfer him into the reliable “gas” hands of Mr. Miller.

Gazprom categorically refused to comment on the results of the meeting; the concern did not even release a message that the negotiations had taken place at all. But the Ukrainian negotiators were less secretive. Minister of Fuel and Energy Yuriy Boyko said that the volume of gas supplies for the three years ahead has already been precisely agreed upon at the level of 62 billion cubic meters (this year 58 billion cubic meters). “The balance has been closed for the next three years at the expense of Turkmen, Kazakh, Uzbek and partially Russian gas,” he said after returning to Kyiv. He emphasized that the last round of negotiations was difficult - the price of gas, which will be supplied to Ukraine in the fourth quarter of this year, as well as in 2007-2009, has not yet been agreed upon. He did not explain how it is possible to determine the exact volume of supplies without determining the price, but expressed hope that next year Ukraine will import gas no more than $135 per thousand cubic meters. “The latest negotiations give us reasons for optimism,” the minister believes.

However, Kyiv will have to come to an agreement with Gazprom and the gas supplier represented by RosUkrEnergo within the next week, because from October 1, Turkmen gas will rise in price from 65 to 100 dollars. And by this time the parties must come up with a new structure for balancing interests - otherwise there will be a cessation again supplies with easily predictable consequences for Europe.

Vera KUZNETSOVA, Alexey GRIVACHS