Translated material
Presidents without a princess
Viktor Yushchenko does not want to let Yulia Tymoshenko attend negotiations in Moscow
The hardware confrontation between the President and Prime Minister of Ukraine on the issue of conducting gas negotiations with Russia continues . Viktor Yushchenko, who managed to get Yulia Tymoshenko's first planned visit to Moscow canceled in January, and last week he was in the Kremlin solving Ukraine's gas problems, clearly does not want to let the initiative slip from his hands. According to the online publication Ukrayinska Pravda, on Friday the head of the presidential secretariat, Viktor Baloga, sent a letter to the prime minister asking her to cancel her visit to Moscow, scheduled for February 21, due to the fact that the president will be there. “Despite the fact that the summit of CIS leaders in Moscow will take place on February 22, Yushchenko decided to go to Russia on February 21, that is, on the day when Tymoshenko’s visit is supposed to take place,” the publication’s interlocutor said.There is no official confirmation of this information yet. A Vremya Novostey source in the White House reported that a meeting between the prime ministers of Russia and Ukraine is scheduled for Thursday, but the Ukrainian side has not yet decided on the time of the visit. The reasons for the possible arrival of the Ukrainian president in Moscow a day earlier have not been advertised. But it is known that this week an important round of negotiations should take place between Gazprom and Naftogaz on the implementation of the agreements that were reached between Putin and Yushchenko at their meeting in the Kremlin on February 12. And, probably, the President of Ukraine wants to be closer to the scene of events than the politically active prime minister.
In the late 90s, Yulia Tymoshenko, who was involved in trading blue fuel, earned herself the nickname “gas princess.” And already in this capacity she received the post of Deputy Prime Minister for the Fuel and Energy Complex in the government of Viktor Yushchenko (under President Leonid Kuchma). Now Mr. Yushchenko is trying to prevent his coalition partner from interfering in the negotiation process and earning additional political points. After all, in a year and a half, she will be the main contender for his presidency. And Ukrainian politicians will have to earn gas points. Gazprom's negotiating position within the framework of the agreements between the presidents of the two countries has sharply tightened. And whoever of the Kyiv guests manages to achieve concessions in Moscow will obviously receive additional dividends in the eyes of future voters.
Vladimir Putin and Viktor Yushchenko discussed bilateral cooperation and the problem of gas relations in Moscow, which in early February came to the point of yet another promise by Gazprom to reduce supplies to Ukraine. The result of that meeting was an agreement to pay off Naftogaz’s debts for already supplied fuel and adjust the gas supply scheme. The Russian side agreed to sacrifice Ukrainian partners in RosUkrEnergo and create new joint ventures with Naftogaz for the supply of Central Asian gas and fuel distribution in Ukraine.
Ukraine consumes about 75 billion cubic meters of gas per year. Of this, about 20 billion cubic meters are produced within the country and are used to meet the needs of the population; the country is forced to import another 55 billion cubic meters. At the beginning of 2006, after the “gas war,” an agreement was signed between Moscow and Kiev that established the current scheme for the supply of imported gas. Gazprom sells gas purchased in Central Asia to the Swiss trader RosUkrEnergo (50% owned by Gazprom, 50% by Ukrainian entrepreneurs Dmitry Firtash and Ivan Fursin), who transports it to the border of Ukraine and sells it with minimal profitability. At the same time, RUE got the opportunity to sell part of the gas to consumers in Hungary, Poland and to Gazpromexport itself for supplies in Germany. This allowed RUE to earn $780 million in net profit in 2006 (data for last year is not yet available).
Taking into account current purchase prices in Central Asia, transit rates and the cost of gas at the Ukrainian border ($179.5), RUE could expect that the net margin from the supply of 55 billion cubic meters of Central Asian gas to the Ukrainian market alone would exceed $550 million. For comparison -- in 2007, it was no more than $200-250 million. If the joint venture between Gazprom and Naftogaz is created, as planned, by April 1, then it can expect to receive approximately $400 million.
And the price for Naftogaz’s participation in this profit is half of the Ukrainian wholesale market. Gazprom proposed to transfer to the second joint venture, which will be created to sell imported gas in the country instead of Ukrgazenergo, the right to sell 20 billion cubic meters of Ukrainian production. There is no particular economic sense for the Russian concern in this yet, since gas is sold to the population at preferential prices (and no one will seriously increase them in the pre-election year). However, taking into account the inevitable rise in prices in the medium term, such a mechanism should strengthen Gazprom’s position in the end-use market.
There were no special objections from the Ukrainian side to this proposal, says a source familiar with the negotiations. Gazprom and Naftogaz did not comment on the topic. But hints began to come from Kyiv about the need to provide the new joint venture with an export quota. First Deputy Prime Minister of the Government Alexander Turchynov said that the Cabinet of Ministers has already prepared its proposals for a new scheme for providing Ukrainian consumers with natural gas, providing for the transition of the state-owned Naftogaz of Ukraine and Gazprom to direct relations, and is also studying the corresponding proposals from the Russian side. “You know the initiative of the Russian side regarding the creation of a joint venture. We also analyze this issue, in what context it is possible in order to improve the situation, and not preserve it under a different name. This is fundamental for us... So that this scheme with the participation of the joint venture will be beneficial not only to our partners, but also to Ukraine,” Turchynov said. - And when we are talking about a joint venture, we cannot talk about gas supplies only to the domestic market. We must also discuss issues of gas exports, from which Ukraine should also receive income... This is a normal, mutually beneficial approach.”
Those around Yushchenko, on the contrary, returned to political demagoguery about Ukrainian investments in the oil and gas sector of Russia and the resumption of negotiations with Central Asian countries on direct sales of gas to Kyiv (and not to Gazprom, as now). Such statements were made by the head of the National Security and Defense Council, Raisa Bogatyreva, who is close to the president, after a meeting of the National Security and Defense Council on Friday. “Ukraine has the intention and desire to be present in the oil and gas sector of the Russian Federation with its investments. These are important issues for us. We believe that our potential is capable of providing Ukraine with a presence in the Russian market,” she said. “It’s certainly a matter of time and successful negotiations.” In an era of intense negotiations on increasing prices for Russian gas, the thesis of investment in the Russian oil and gas sector was one of the favorite speeches of Belarusian President Alexander Lukashenko. But it did not evoke any emotions (or consequences) on the part of Moscow.