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Russia, Ukraine agree on gas prices

Gazprom and Ukraine have reached a compromise settlement on higher prices for natural gas supplies to Ukraine.

business Updated: Jan 04, 2006 18:03 IST

Russian energy giant Gazprom and the Ukraine announced early Wednesday they have reached a compromise settlement on higher prices for natural gas supplies to Ukraine.

The announcement came after all-night negotiations between Russian gas giant Gazprom and the Ukrainian energy company Naftogas Ukrainy to try to settle the dispute which also threatened to affect Russian gas deliveries to western Europe.

In a complicated arrangement, Gazprom is to sell gas at a price of $230 per 1,000 cubic metres to an intermediary company, Rosukrenergo, Gazprom boss Alexei Miller told a press conference.

In turn, Rosukrenergo, which is a joint venture between Gazprom and the Austrian company Raiffeisen Investment AG (RIAG), will sell gas, some of it derived from cheaper Central Asian suppliers, to Naftogas Ukrainy at $95 per 1,000 cubic metres.

At the same time, Naftogas Ukrainy boss Alexei Ivchenko said the Russians will be paying a higher trans-shipment rate for gas being exported to western Europe via pipelines through the Ukraine.

The new rate will be $1.6 per 1,000 cubic metres and 100 km, compared with $1.09 previously, he said.

Ivchenko also noted that the rates would be paid in cash. Previously, Gazprom had paid for the trans-shipments through Ukraine with gas deliveries.

The pricing arrangement represents a compromise after Gazprom had been seeking a market rate of $230 per 1,000 cubic metres starting with the New Year. Till now, Ukraine had been paying only $50.

Russia turned off the taps to its neighbour January 1 after Ukraine refused to pay the international price of $230 per 1,000 cubic metres of gas instead of the subsidized rate of $50 paid in recent years.

The European Union (EU) urged a negotiated solution between both countries as the blockade quickly affected European countries that receive Russian gas through Ukrainian pipelines.

EU Energy Commissioner Andris Piebalgs warned Russia against holding the EU hostage in the crisis, urging the Russians and the Ukrainians to negotiate over the price of gas.

Germany, Austria, Hungary, Poland, Serbia-Montenegro, Romania, Italy and France all reported decreases of up to 30 per cent in their flows.

First Published: Jan 04, 2006 17:15 IST