Ukraine, Russia resume gas talks as deadline looms
(AP)
Updated: 2005-12-29 16:52

Ukraine and Russia resumed tense talks Thursday amid Russian threats to cut off natural gas exports to its energy-dependent neighbor within 72 hours unless Kiev agrees to pay four times as much.

The dispute has brought to a boiling point the tensions that have strained relations between Moscow and its former imperial satellite since reformist President Viktor Yushchenko came to power in Ukraine after last year's Orange Revolution, promising to move his nation of 48 million toward integration with the West.

Russia's state-controlled gas monopoly Gazprom has threatened to turn the taps off at 10 a.m (0700 GMT) on Sunday if Ukraine refuses to sign a new contract at a price of US$220-230 (euro186-194) per 1,000 cubic meters.

That is more than four times the current tariff of US$50 (euro42). Ukrainian Prime Minister Yuriy Yekhanurov on Wednesday denounced the Russian demand as unacceptable pressure. Ukraine relies on Russia for nearly a third of its gas needs.

Ukrainian Energy Minister Ivan Plachkov flew into Moscow on Wednesday for talks with his Russian counterpart Viktor Khristenko but the two officials left the negotiations late in the evening without a deal.

Officials from OAO Gazprom and the Ukrainian state energy company Naftogaz met Wednesday morning and the two ministers were due to resume their talks later in the day.

Plachkov late Wednesday expressed hope for a negotiated outcome. "There is no way to do without movement and compromises," he said in footage shown on NTV television.

Gazprom argues that it has every right to demand the increase as a justifiable move to scrap energy subsidies enjoyed by former Soviet nations and move the price it charges Ukraine more into line with world levels.

Ukraine, which fears such a sharp rise in energy costs could cripple its energy-intensive heavy industry and impede efforts to boost its economy, has asked for the increases to be phased in over five years instead of all at once.

Yekhanurov warned Tuesday that Ukraine could divert some of the Russian gas supplies going to Europe, insisting it was Kiev's right to take 15 percent of shipments passing through its territory to European markets as transit fees.

Gazprom, which earns billions of dollars (euros) a year from lucrative exports to Western Europe _ half of the European Union's gas imports come from Russia _ said such action would amount to theft.

Ukraine has pointed out that other ex-Soviet republics such as Georgia and Armenia have had their gas tariffs raised far less _ to just US$110 (euro93) per 1,000 cubic meters.

Belarus, a Russian ally, is to pay US$46.68 (about euro37) for Russian gas next year _ just 20 percent of what the company wants Ukraine to pay.

Maxim Yusin, foreign editor of leading Russian daily Izvestia, said that Ukraine could not expect to keep preferential gas tariffs while behaving as an "openly anti-Russian force in the post-Soviet space."

He predicted, however, that the dispute would work against Russia's strategic interests by weakening support for last year's losing presidential contender, the Kremlin-backed Viktor Yanukovych, whose party has been expected to poll strongly in March parliamentary elections.

"It won't help the candidate who is friendly to Moscow, most Ukrainians will rally around Yushchenko," Yusin said.

Under constitutional changes in Ukraine, the winning party will choose the next prime minister who will have expanded powers at the expense of the presidency.

Ukraine uses almost 80 billion cubic meters (2.2 trillion cubic feet) of gas annually, receiving 25 billion cubic meters from Russia, and 36 billion cubic meters from Turkmenistan, pumped via Russia. Ukraine itself produces some 18 billion cubic meters.