Yanukovych prepared to offer Putin a gas deal

Vladimir and Viktor.jpeg

Ukrainian President Viktor Yanukovych hinted that he might be ready to cede some control of his country's gas pipeline system that transports Russian gas to Europe ahead of a meeting today (4 March) with his Russian counterpart.

Yanukovych indicated that Ukraine would not surrender its pipelines to Russia, but offered Russia some control over the infrastructure.

"We do not want to trade our sovereignty over this issue, and we will not do that. But it is clear that we have to make some concessions somewhere, find the price that Russia will accept in order to review the contract," he told the Moscow Times before heading to Russia to meet President Vladimir Putin.

He suggested this could take the shape of a joint venture between Ukraine and Russia in which Russian gas monopoly Gazprom rented part or all of Ukraine's pipeline system.

"Our proposal is very simple. The pipeline network would remain state property. Maybe, a future company could rent this pipeline and provide guarantees of transit volume and work on upgrading the pipeline," he said.

Yanukovych was due to discuss gas prices with Putin last December, but the Ukrainian leader pulled out at the last minute, saying more time was needed to draft official documents.

The visit of Yanukovych to Moscow comes after a much delayed EU-Ukraine summit that took place on 25 February. Council President Herman Van Rompuy told Yanukovych that the EU wanted to see Ukraine take “determined action" and make "tangible progress” on human rights issues within two months, including on the case of imprisoned former Prime Minister Yulia Tymoshenko.

Possible pardon for Tymoshenko ally

Speaking at the same press conference in Kyiv, Yanukovich indicated that he might pardon former Interior Minister Yuri Lutsenko, a prominent ally of Tymoshenko.

In February 2012, Lutsenko was sentenced to four years for abuse of office and embezzlement. His family says his health has deteriorated in prison.

“He’s in a complicated situation,” said Yanukovych. “If the final court of appeal doesn’t release him, I will consider pardoning him.”

Ukraine’s highest court has yet to schedule a date for the appeal.

“Tymoshenko’s case is very complicated – the new criminal code allows leniency in economic cases but only if the state’s losses are covered,” Yanukovych added. Tymoshenko “should think how to repay the losses she caused.”

Tymoshenko is charged with interfering in the talks between Ukraine's Naftogaz and Gazprom in 2009, asking the then Naftogaz chief Oleg Dubina to sign an agreement for an "enormous" price of €334 per thousand cubic metres, while the market price at the time was €137.

In addition, the contract stipulated a fine worth 300% of the gas price if Ukraine refused the principle of "take or pay". The higher gas prices should have resulted in an increase of the transit fees Ukraine receives from Gazprom, but Tymoshenko blocked this, to the detriment of Ukraine, the prosecutor said.

Prosecutors say the deal cost Ukraine more than €300 million.

Ukraine is struggling to afford its fuel bill to Russia under the current terms, which stem from a 2009 agreement over which Ukraine's former prime minister, Yulia Tymoshenko, was imprisoned on charges of abuse of office.

Kyiv says the price of $430 per 1,000 cubic metres it is paying this quarter is too high but has balked at demands for big concessions to Moscow to achieve a reduction.

These could include surrendering its pipeline system to Gazprom or joining a customs union with Russia, Ukraine and Belarus.

Russia's gas export monopoly Gazprom, an important contributor to the Russian state budget, depends on European exports for the majority of its revenues, while Ukraine depends on transit fees from Russia to fill its state coffers.

Cuts to European gas supply transiting Ukraine during earlier disputes exacted a cost for both countries, prompting Europe to step up an energy-security agenda, including reduction of transit risk and diversification of supply away from Russia.

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