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Russia, Ukraine reach new gas deal at 38% higher price

Energy Trade

Russia and Ukraine have agreed on a natural gas supply deal, under which Ukraine will raise its payments to Russia by 38% in 2008, Russia’s gas giant Gazprom said Tuesday.

The move is considered a relief from the anxiety over a possible natural gas shortage in Europe. The price of natural gas will be raised to $179.5 per 1,000 cubic meters from $130 this year, according to the agreement signed between Gazprom CEO Alexei Miller and Ukrainian Energy Minister Yuri Boiko. The fee for transporting Russia’s natural gas to Europe via Ukraine will also rise to $1.7 per 1,000 cubic meters from $1.6. „The agreement can guarantee the transit of gas to Europe via Ukraine,” Ukrainian Energy Ministry spokesman Konstantin Borodin said. A large proportion of Ukraine’s natural gas consumption, which amounts to approximately 80 billion cubic meters per year, is imported from Russia.

Russia cut off natural gas supply to Ukraine for several days in early 2006 after Kiev refused Moscow’s demand to more than quadruple the price. The suspension posed a serious threat to Europe, where oil prices had risen more than 10% in a week. The months-long price dispute ended with a five-year deal, under which Gazprom will sell gas for $230 per 1,000 cubic meters to the Rosukrenergo trading company, which will mix the Russian gas with cheaper gas from Central Asia and sell the blend to Ukraine for $95 per 1,000 cubic meters. Ukraine had been buying Russian gas at $50 per 1,000 cubic meters over 2005. Gazprom provides more than a quarter of the gas consumed in the European Union, some 80% of, which is sent through pipelines that cross Ukraine. (people.com.cn)

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