Ukraine rejects 'take-or-pay' gas deal

  

Ukraine will not buy the amount of gas from Russia set out in a 2009 bilateral agreement which Kiev says is unfair, Ukrainian Prime Minister Mykola Azarov has said, setting the tone for a new round of gas price talks.

"We have clearly told them [Russia] that we are not going to buy the huge volume of gas that is set out in these enslaving contracts," Azarov's office quoted him as saying on a visit to the Ukrainian city of Khmelnitsky on 17 January.

The Russia-Ukraine gas agreement, signed by former Prime Minister Yulia Tymoshenko, has a "take-or-pay" clause which obliges Ukraine to pay for gas under the contract even if it doesn't import it. Tymoshenko is serving a 7-year prison sentence on charges of abusing her power in negotiating gas contracts with Russia. 

Under the 2009 contract, Ukraine is paying $416 (€323) per thousand cubic metres of gas in the first quarter of this year. Kyiv sees a fairer price at $250 (€194).

The Kiev government also said earlier it wanted to reduce Russian gas purchases to 27 billion cubic metres (bcm) this year from 40 bcm in 2011.

Gazprom has said such a reduction is impossible under the current supply deal signed in 2009. Ukraine must buy 52 bcm of gas this year, Gazprom says.

New talks in Moscow

Azarov spoke as a fresh round of talks began in Moscow which the government hopes will lead to Moscow agreeing to cut the price of its gas supplies to Ukraine as set out in the 10-year agreement.

However, the sides announced no developments after talks between Ukrainian Energy Minister Yuri Boiko and Russian gas export monopoly Gazprom Chief Executive Alexei Miller on Tuesday.

"The sides agreed to continue consultations and negotiations on cooperation in the gas sector," Gazprom said in a statement.

Moscow says it will reduce the price only if Gazprom gets a stake in the Ukrainian pipeline network which tranships the bulk of Russian gas bound for Europe.

Kiev has refused to do that for fear of losing leverage over its neighbour and because the move would hurt the already sagging popularity of President Viktor Yanukovich and his Party of the Regions ahead of an October 2012 parliamentary election.

Spymaster takes over economy

In the meantime, Yanukovych sacked his finance minister and appointed an ally to replace him, tightening his grip on the country's purse strings ahead of the election.

Yanukovich has named State Security chief Valery Khoroshkovsky, who is part of a close circle of advisors, to step in as finance minister within a few hours of Fedir Yaroshenko announcing he was quitting the post.

One analyst saw Yaroshenko's departure as part of a broader picture, reflecting strains within the leadership over how to shore up Ukraine's stretched finances. 

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