Ukrainian Prime Minister Mykola Azarov arrived in Moscow yesterday to discuss the perpetual issue – Russian gas – prices with his Russian counterpart Vladimir Putin. The conversation did not deviate much from tradition. Azarov said that the economies of both countries depend on each other and, hence, Moscow could show understanding for the problems of his country. Putin reminded his guest that there is a signed contract that reflects the interests of both sides. In this way he made it clear that Russia will not reduce prices for Ukraine.
"From your perspective, it (this agreement) is very good. However, it might result in a wide range of problems. We think that a discussion of this issue is overdue," Azarov said at a news conference after the meeting. Despite Gazprom's adamant stand, Ukraine repeats at almost every meeting that ex-Prime Minister Yulia Tymoshenko drove the country into gas bondage. It claims that under the existing formula the prices keep going up whereas the transit rates it can charge Russia remain the same. As a result, Kiev continues to lose ground.
Ukraine objects to the absence of wholesale discounts in the contract and to the fact that it does not really matter how far a customer is from the gas source. In other words, Germany and Slovakia are much further from Russia than Ukraine but pay less. This is not fair, Azarov concluded.
The Russian position remains unchanged. At yesterday's press conference Putin reiterated this once again: "...the formula for natural gas pricing used for Ukraine is the one that works for all our European partners." "It's true that prices are rising, but this is not our fault. Gas prices are tied to world market prices for oil and petrochemicals... This is commerce, but we could show how much the neighbouring countries are paying..." the Russian prime minister said. Like gas prices, fees for transit are based on a specific formula. "When we signed this contract, we agreed that fees for transit and gas prices would be commercial, market prices. We provided a discount the first year, and our Ukrainian partners gave us a transit fee discount... The cost for gas and gas transit fees depend on each other," Putin said, being as adamant as ever. If Kiev decides to raise transit fees, Russia will automatically increase gas prices.
Let's recall that $450 per thousand cubic metres of gas was chosen as the base price for the moment (Ukraine receives a 30% discount from the contractual price but no less than $100 per thousand cubic metres). On the eve of the talks, however, Gazprom CEO Alexei Miller noted that the price of gas could reach $500 in long-term contracts in the fourth quarter of this year. The gas price-setting formula for Ukraine will continue to be linked to market prices.
Yesterday Putin preferred to talk with his Ukrainian colleague tête-à-tête and even cancelled a limited attendance meeting. However, during the open part of the extended meeting of the Russian-Ukrainian State Commission's Economic Cooperation Committee, Putin suggested "that Ukraine take a more active approach toward multilateral integration processes, especially the Customs Union and the Common Economic Space."
"The ball is in Ukraine's court," Putin said. "It is important not to limit the issue to expanded mutual trade only," he added. "Our strategic goal is to achieve a whole new level of cooperation between our countries. I am talking about the development of production cooperation, partnership in high-tech industries and the promotion of mutual long-term investment," he said.
Following the committee's meeting Putin and Azarov signed a programme of bilateral cooperation for 2011-2020.
In addition, the two sides endorsed a plan of action on implementing the Programme of Inter-Regional and Trans-Border Cooperation. Russian Regional Development Minister Viktor Basargin and Ukrainian First Deputy Foreign Minister Ruslan Demchenko signed this document in the presence of both prime ministers. Both parties also agreed to cooperate on agricultural quarantines. Russian Minister of Agriculture Yelena Skrynnik and her Ukrainian counterpart Mykola Prisyazhnyuk signed an inter-governmental agreement to this effect. The sides have also decided to set up a working group to discuss gas issues.
Anastasia Savinykh