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Ukraine to pay $1.3 bln gas debt to Russia by Nov.1

Gazprom’s CEO and Ukraine’s fuel and energy minister agreed on Wednesday that Ukraine would repay its $1.3 billion gas debt by November 1, the Russian energy giant said.

Alexei Miller and Yuriy Boiko met after Gazprom threatened on Tuesday to cut supplies to Ukraine in October if the country failed to settle the debt. The situation was reminiscent of a bitter price row in early 2006, when Moscow briefly cut off exports to its former Soviet ally stirring European consumers’ concerns. “An agreement was reached that Ukraine’s current government will take the problem under its control and ensure payment of the debt before November 1,” Gazprom’s press office said.

Russian First Deputy Prime Minister Dmitry Medvedev, and chairman of Gazprom’s board of directors, who also attended the meeting said the parties had agreed to avoid similar problems in the future, and that European consumers would not be affected. Ukraine’s first deputy prime minister and finance minister said earlier on Wednesday that his country had no state debt for Russian natural gas supplies. “I want to declare unequivocally ... that Ukraine has no debts to Gazprom,” Mykola Azarov said.

Gazprom explained later Wednesday that the debt in question was owed by Ukrainian consumers. Gazprom’s threat came following preliminary reports that pro-Western “orange” parties have secured enough votes in Sunday’s early parliamentary elections, and are set to forge a ruling majority. Charismatic democratic leader Yulia Tymoshenko, widely tipped to become premier, has already said Ukraine should revise existing gas deals with Russia and that the sole supplier of Russian gas to the country, RosUkrEnergo, which is 50% owned by Gazprom, is not needed.

Moscow and Kiev resolved their gas problem in 2007 under current Prime Minister Viktor Yanukovych - whose party leads the polls, but who could be out-seated by a larger “orange” coalition. But Gazprom plans further price increases next year. The gas price for Ukraine rose from $95 to $130 per 1,000 cubic meters in 2007 after a price rise for Turkmen gas Russia re-exports to Ukraine. In 2008, gas could appreciate further to $143-$180. Gazprom insists its repeated demands for repayment of the debt have gone unanswered by Ukraine, and the country can well afford to pay the 2007 prices. The European Commission said on Wednesday it would hold a meeting in mid-October inviting Ukrainian government and Gazprom officials to clarify the situation. (