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Russia suspicious of EU-Ukraine gas “master plan”

  Europe welcomed a Ukrainian “master plan” to modernize infrastructure for carrying Russian gas to the west but Moscow warned on Monday the bloc’s energy security was at risk if Russia was not consulted.

Russian Energy Minister Sergei Shmatko said the move appeared to draw Ukraine legally closer to the European Union and might harm Moscow’s interests. “This unilateral approach...might lead to a great deal of damage to EU energy security,” he added.

Ukraine presented an investment conference with the plan to spend billions of euros boosting the capacity of its Soviet-era gas pipelines from 140 billion cubic meters (bcm) each year by a further 60 bcm, and called for help from European investors.

Ukraine, the EU executive and three international banks signed a pledge of cooperation, aimed at encouraging investment and averting a repeat of this winter’s gas crisis, caused by a price row between Kiev and Moscow.

That spat shook the EU, which has been uneasy about its reliance for energy on the newly assertive Moscow since Russia invaded neighboring Georgia last August.

“We cannot allow our citizens to experience fuel shortages in the depths of winter again,” said Benita Ferrero-Waldner, EU commissioner for external relations.

INTEGRATION

Shmatko said the declaration touched on more sensitive issues than just gas. “It goes far beyond modernization of the Ukraine transit system and talks of the integration of Ukraine into the legal sphere of European system as far as energy,” he told reporters.

“The declaration sets up some agreed principles between Ukraine and the EU about changing the whole system economic relations in the gas sphere,” he added. “This is the thing that directly affects the interests of the Russian Federation.”

About a fifth of Europe’s gas comes from Russia via Ukraine. “Russia thinks that Europe is pursuing strategies to get Georgia and Ukraine into the west, to move the EU’s eastern border, but that’s a misperception,” said analyst Susanne Nies at French think-tank Ifri.

Ukrainian Prime Minister Yulia Tymoshenko described the proposal to modernize the network as a cheaper way of increasing EU gas imports than building long distance gas pipelines such as Nabucco from the Caspian region.

And she said the corruption that had long plagued the Ukrainian gas market had been stamped out. “The intermediaries have been eliminated,” Tymoshenko told reporters. “The shadow money that was traveling alongside this sector will not travel there in 2009.”

Philippe Maystadt, president of the European Investment Bank, said reform of the Ukrainian gas trading system was essential to encourage investment in the country.

Ukrainian President Viktor Yushchenko said Ukraine’s first investment priority was to replace out of date facilities, followed by the introduction of a high precision metering system.

The joint declaration said Ukraine would ensure the gas network operator would become a truly independent commercial entity, which would provide fair and transparent tariffs for gas transport. It would also rent out its huge gas storage sites. (Reuters)