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Record Russian gas price before Ukraine talks

  Russian gas giant Gazprom, on the eve of critical talks with Ukraine’s prime minister, said on Wednesday that its export gas price for Europe has reached an all-time high of over $500 per 1,000 cubic meters (tcm).

 

Chief executive Alexei Miller’s statement amounted to serving notice to Prime Minister Yulia Tymoshenko that she would get no easy ride in her bid to secure a deal to shield Ukrainian industry from an abrupt increase to market levels. “As of today we can say that the price growth dynamic has surpassed Gazprom’s expectations, and the price for the gas supplied by Gazprom to Europe exceeded $500 in October,” a Gazprom statement quoted Miller as saying. Gazprom has long said it wants to switch to market prices with ex-Soviet states and has suggested it could significantly increase the price for Ukraine, currently at $179.50 per tcm. Ukraine has acknowledged that it will one day have to pay market rates. The key issue is when they will take effect.

Tymoshenko told journalists in Kiev that ministers had approved a framework for the talks which implement President Viktor Yushchenko’s order for a long-term gas accord that would make clear when Ukraine would have to pay the market price. “I hope that we can sign the agreement, but I would be cautious about any predictions because the talks will be difficult,” she said. “There is no doubt that there will be a price increase, because we are gradually, year after year, moving towards a market price.” Gazprom has suggested the price for Ukraine could more than double to $400 in 2009. Tymoshenko last week said that level would cause an “absolute shock” to the country’s economy.

The Russian government said this week that Tymoshenko and her Russian opposite number, Vladimir Putin, would discuss „various aspects of trade and economic cooperation, and also mutual activities in the energy sphere”. Russia’s Interfax news agency said Tymoshenko would sign a deal in Moscow which would show Russia’s support for her government without any mention of a final gas price. “This agreement is of political nature and aims to support the government of Yulia Tymoshenko,” Interfax quoted an informed source in Moscow as saying. Tymoshenko, who is in negotiations to form a new ruling coalition, has been accused by critics at home of turning to Moscow for political backing after earlier being noted as a critic of the Kremlin, especially over energy policy.

Europe closely watches gas talks between Russia and Ukraine after a pricing dispute briefly cut transit supplies of Russian gas to Europe in January 2006. Russia supplies a quarter of Europe’s gas and its gas export monopoly Gazprom has warned Kiev that prices for Ukraine will more than double in 2009 after oil prices rose to a record earlier this year. (Reuters)