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Ukraine wants Russia to pay with gas for fuel transit to Europe

Ukraine wants Russia to pay with natural gas to pump fuel to Europe through its pipelines, Ukrainian Deputy Prime Minister Andriy Klyuyev said.

Ukraine wants 30 billion cubic meters of gas as a payment for gas transit, Klyuyev said today on his party's Web site. That would be similar to arrangements Ukraine and Russia had from 2002 to 2004, „which were more favorable for Ukraine,” he said. Ukraine relies on imports for about 80% of its energy, mostly from Russia. Russia and Ukraine agreed on cash payments for energy trading instead of payments in kind last year, after Viktor Yushchenko defeated Viktor Yanukovych, who was backed by Russia, in a disputed presidential election. Yanukovych became prime minister and formed a cabinet in August after his party won parliamentary elections. Now, Ukraine and Russia can restore the agreements they had before Yushchenko took office, Klyuyev said. Russia cut off gas to Ukraine in the first three days of January 2006 after Ukraine rejected a demand by OAO Gazprom, Russia's state-run gas-export monopoly, to quadruple the price it paid. That led to shortages elsewhere to Europe, including Hungary, Italy, and Germany.

Ukraine agreed January 4 to pay $95 per 1,000 cubic meters for Russian gas in 2006, compared with the $50 it had paid and the $230 demanded by Gazprom. In turn, Gazprom agreed to pay a higher fee for shipping its gas via Ukrainian territory. The tariff was raised to $1.6 per 1,000 cubic meters of gas shipped for 100 kilometers, about 60 miles. That was an increase from 2005's charge of $1.09. According to the January 4 agreement, if gas prices for Ukraine increase, fees Russia pays to ship gas to Europe via Ukraine also increase. Russia raised gas price for Ukraine up to $130 per thousand cubic meters of gas, but the price for transit has remained the same. Russia supplies a quarter of European gas, 80% of which is shipped through Ukraine. (Bloomberg)