Vladimir Putin and Yulia Tymoshenko have discussed modernisation of the gas transportation system.
The Prime Ministers of Russia and Ukraine had talks in Moscow on Wednesday. The two Prime Ministers had a one-on-one meeting before being joined by the members of Government delegations. The central issue was gas, especially the Brussels declaration recently signed between Ukraine and the EU (the document on the modernisation of the Ukrainian gas transportation system funded by the EU). "The document does not say a word about Russia's participation as the main supplier of energy to Europe," Mr Putin reminded Ms Tymoshenko.
A MONTH ON
Yulia Tymoshenko was planning to come to Moscow for bilateral talks and a meeting of the Intergovernmental Commission in March. However, Russia asked for the visit to be postponed at the last moment on the grounds that it was necessary "to study the declaration on the modernisation of the Ukrainian gas transportation system signed between Kiev and Brussels". The declaration would effectively integrate the Ukrainian GTS into the European one. It would offer equal access to the pipeline to all the suppliers (Russia believes this would increase the number of intermediate companies) and give third parties access to Ukrainian gas storage facilities. In exchange for compliance with these terms Brussels promised to shell out $2.57 billion for modernisation of the GTS.
After studying the document the Russian authorities noted that the declaration ignored Russia's interests as the main gas supplier to Ukraine and, via Ukraine, to Europe. Vladimir Putin, speaking in Sochi at the end of March, proposed to recreate an international consortium involving Ukraine, Russia, Germany and France ( which never got off the ground although Russia had paid $17 million into its authorised fund) to manage and modernise the Ukrainian GTS.
On Wednesday Yulia Tymoshenko said that she was not against Russia taking part in the modernisation of the Ukrainian GTS. However, she made no comment on the proposal to revive the multilateral consortium thus indicating that Ukraine does not as yet intend to turn down the $2.57 billion offered by Brussels.
Reports that the parties had prepared a draft intergovernmental agreement that would de facto sanction the building of a Gazprom pipeline on Ukrainian territory before the talks have not been confirmed. In any case, no intergovernmental energy agreements emerged from the Wednesday meeting apart from agreements on jointly completing the construction of the Khmelnitsky Nuclear Plant and on opening trade missions.
At the same time Russia made it clear that it would not agree to the Brussels declaration unless its terms were revised to take Russia's interests into account. "It is necessary to take the new realities into account: we are the main supplier of gas via the Ukrainian GTS. When we see that the capacity of the gas pipelines may be increased to 60 billion cubic metres we cannot help wondering where the gas would come from," said Vladimir Putin after the talks.
Deputy Prime Minister Igor Sechin told Gazeta that under Ukrainian law the GTS was a national company that could not be transferred into private hands. "Therefore the declaration may violate Ukrainian law, as until the break-even point is reached the GTS would be in somebody else's operational management," Mr Sechin warned.
PRESSURE WITH THE ROUBLE
Even so, Moscow still has some leverage on Kiev. Chief of them is the need for Ukraine to pump 19.5 billion cubic metres of gas into its storage facilities to ensure the normal operation of its GTS next winter. "They should have pumped gas into the storage reservoirs two weeks ago. However, the process has never really got off the ground," a Government source said.
It will be recalled that in January the two sides seemed to have reached an agreement on pumping gas into Ukrainian reservoirs to offset Gazprom's payment for gas transit to European consumers. However, on Wednesday Ms Tymoshenko promised merely to start drafting an international agreement on payment for the gas pumped into the reservoirs in instalments "as pre-payment by Gazprom for transit services." Whether the agreement will be approved by the Russian side remains to be seen.
Late at night news agencies reported, citing a source in the Russian delegation, that Mr Putin and Ms Tymoshenko had agreed that Naftogaz would pay for gas supplies in April out of the advance payment Gazprom would transfer to Naftogaz for gas transit during the whole of 2009. The gas in question has already reached its consumers. It is still unclear from what resources Naftogaz is going to pay for the gas pumped into its storage facilities. One option is a state loan of $5 billion (incidentally, this is the cost of 20 cubic metres of gas) Ukraine has been seeking from Russia for over a month. However, Moscow is not yet prepared to credit Kiev.
"The topic needs further study and consultations. No final decision has been made," Mr Putin admitted. However, Russia does not intend to fine Ukraine for not consuming all the gas it had contracted for: "We understand Ukraine. It has an agreement with Gazprom not to impose sanctions. The Ukrainian economy is not in very good shape." Mr Putin said that if Gazprom did not impose fines it would lose about $2 billion.
Although Vladimir Putin and Yulia Tymoshenko failed to agree on key issues on Wednesday, Igor Sechin described the results of the talks as positive: "The very fact that the talks have been held is a plus. A discussion is under way on cooperation in many areas."