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Focus on Ukraine, January 19-25, 2009

January 26, 2009
Ukraine in Focus

Overview of political events of the week

January 19, 2009

Gazprom and Naftogaz Ukrainy signed a 10-year contract on the supply of gas to Ukraine and its transit to Europe. The CEOs of the two companies Aleksei Miller and Oleh Dubyna signed the agreement in the presence of the premiers of Russia and Ukraine – Vladimir Putin and Yulia Tymoshenko.
In 2009 Ukraine will pay the average European price of gas with a 20% discount, while Russia will pay last year’s transit fee of US $1.70 for 100 km.
Putin and Tymoshenko said today’s agreement will allow for the uninterrupted transportation of gas to Europe in the nearest hours.
Gazprom was already given instructions to renew the transit of gas in its full volumes in all directions and Ukraine promised to immediately transport the gas to all countries that consume it. As a reminder, the transit of gas to Europe via Ukraine was suspended on January 7, while the supply of gas to Ukrainian consumers was cut off on January 1.

Speaker of the Verkhovna Rada Volodymyr Lytvyn stated that the initiative of the dissolution of the government or the impeachment of the president will not improve the situation in the country. On the contrary, it will only deepen the crisis.
As a reminder, last week representatives of the Party of Regions and the Communist Party of Ukraine stated their intent to call for the impeachment of the president and motion for the parliament to review the issue of non-confidence in the current government. Despite this, the government’s report did not even make it to the order of the day.

January 20

Russian gas is once again flowing into Ukraine. At 9:05 am Kyiv time Gazprom renewed the supply of gas via the Sudzhe gas gauging station and will soon be pumped through other stations.
Gazprom is gradually increasing the supply of gas in all directions of Ukraine’s gas transport grid. Gas will only reach Europe tomorrow evening.
Representatives of Naftogaz Ukrainy said that Russian natural gas will only enter Ukraine’s gas transport grid 36 hours after the start of its transit.

Ukraine will pay US $228.80 per 1,000 cubic meters of gas at the border, not including VAT and customs clearance and transportation fees.
Ukrainian Premier Yulia Tymoshenko announced today at a press conference that this price will take effect starting January 1, 2009 and apply for every quarter of the year. She also pointed out that according to the formula approved during negotiations, Ukraine will pay approximately 10% less for gas than Western European countries.
Tymoshenko also informed that Ukraine purchased 11 billion cubic meters of “technical” gas from Russian at US $167 per 1,000 cubic meters. The head of government assured that in the future the transit of Russian gas to Europe through Ukrainian territory will not be cut off.

First Deputy of the Presidential Secretary Oleksandr Shlapak stated that the new gas agreements between Ukraine and Russian do not fully correspond to the directives of the president.
Furthermore, Shlapak stressed that this is his own personal view and hopes that the president will soon give his assessment of the new gas contract. He added that Ukraine will pay a higher price than that offered to the majority of European countries and was given an extremely unfavourable formula for price setting, though on a positive note he said this formula is transparent and there are not intermediaries between Naftogaz and Gazprom.

President of the European Commission Jose Manuel Barroso told journalists in Brussels today that Russia is an unreliable supplier of gas, while Ukraine is an unreliable partner for the transit of natural gas.
In his opinion, Europe must draw conclusions concerning its problems with gas and diversify its supply, which requires sources of gas delivery and transit routes.

Viktor Yushchenko said at a press conference in Chernihiv that the US $228 for 1,000 cubic meters the government announced is not realistic.
He said that in order for the average price of gas to be US $228 for the entire year, the price in Q4 should be US $132/ cu. m., which is totally unrealistic.
The president is convinced that a price of US $450 per 1,000 cu. m. in Q1 2009 is a losing situation for Ukraine.

January 21

Czech Premier Mirek Topolanek feels the renewal of the supply of Russian gas to Europe is a joint victory of Ukraine and the European Union.
Thanked Premier Yulia Tymoshenko in a telephone conversation for her taking a responsible and pragmatic position amidst the gas crisis, as well as for her decisiveness in resolving the issue of the transit of Russian natural gas to countries of Europe.
At the same time, the Czech premier highly appraised the gas agreements concluded between Ukraine and Russia.

First Vice Chairman of Naftogaz Ukrainy Ihor Didenko stated at a press conference that the company intends to buy only 5 billion cubic meters of gas from Russia in Q1 2009 due to its high price.
Didenko said 12 billion cubic meters is the standard volume of imported in the first quarter. He added that Ukraine will buy a total of 40 billion cubic meters of gas in 2009.

January 22

The Verkhovna Rada will consider the dismissal of the governor of the NBU next week. Premier Yulia Tymoshenko is counting on this. She said the required number of signatures for summoning an extraordinary meeting has already been gathered. The premier is also not ruling out that the impeachment of the president will be reviewed.

Assistant Secretary of the President Andriy Kyslynskiy announced that the Prosecutor General’s Office and the SBU are to review the gas contracts between Ukraine and Russia.
He said that Premier Yulia Tymoshenko must answer a number of questions regarding the country’s national interests. In particular, the premier must say whether it’s true that an affiliate of Gazprom was given control over a fourth of Ukraine’s gas market and the right to sell fuel at a discount exclusively to companies backed by Russian capital.
Another issue is whether Tymoshenko will indeed lobby for the creation of a gas transport consortium. Kyslynskiy believes that the two sides of the recent meeting in Moscow agreed to a political ambush of the Ukrainian president.

January 23

The press service of the parliament informed that the Verkhovna Rada will convene for an extraordinary session on Monday, January 26.
The Yulia Tymoshenko Bloc is the initiator of the session in which the main topic of discussion will be the situation with the National Bank of Ukraine and its governor Volodymyr Stelmakh.
The YTB is calling for the governor’s dismissal. At the same time, the Party of Regions is initiating the issue of non-confidence in the government.

January 24

Prosecutor General of Ukraine Oleksandr Medvedko commented in the weekly newspaper Dzerkalo tyzhnya (The Weekly Mirror) that Ukraine did not siphon Russian gas.
Medvedko informed that the PGO conducted inspections of gas distribution stations in conjunction with the Ministry of Internal Affairs, the SBU, tax inspectors and the customs authority.
The prosecutor general said that now Ukraine can provide a competent answer to all accusations of the Russian side.
 



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