New Russian-Ukrainian Gas Agreements.

At the end of October, RosUkrEnergo AG and UkrGazEnergo signed an annex to the treaty on purchase/sale of gas for 2006-2010 dated Feb. 2, 2006. Under this agreement, Ukraine will receive at least 55 BCM/year of Central Asian gas at $130/000 CM in 2007, RosUkrEnergo said in a statement. Given its own gas production, it will fully meet Ukrainian gas demand. The statement says: "The parties have also agreed on the amount of gas to be supplied in 2008-2009. Gas prices will be based on the economy of natural gas purchases in Central Asian countries".

Under Russian-Ukrainian agreements, Kiev is buying gas from RosUkrEnergo at $95/000 CM this year. So tensions around gas prices and volumes have been alleviated. The Ukrainian government is triumphant.

Gas prices for Ukraine will be among the lowest in the former Soviet republics. Moldova already pays $160/000 CM, and the Baltic countries from $160 to $200. Georgia, Armenia and Azerbaijan at present buy gas at $110/000 CM, but Gazprom intends to revise them next year - with the exception of Armenia whose price will not be reviewed until 2009. Belarus is offered gas at $200.

The Russian-Ukrainian gas agreement received a lot of attention in the world. Their bilateral relations have a significant bearing on Russian gas transit to Europe. Memories of the January 2006 gas war are still fresh. This time, it seems, a conflict has been avoided, but it is doubtful that the issue can be closed, primarily for political reasons. Surprisingly, the main threat to the agreement comes from Kiev. The Orange revolutionaries, who have been politically weakened, are using all possible excuses to disrupt the gas contract, which has increased the political clout of Viktor Yanukovych's government. On October 30, the parliamentary faction of Yulia Tymoshenko's bloc demanded that the government resign because of the new gas price. The Russian party does benefit from the agreement in several ways. After numerous delays, Ukraine finally acknowledged that the agreement of January 4, 2006 would be valid for at least another year. Under this document, Ukraine has to buy all imported gas from RosUkrEnergo, which is 50% owned by Gazprom. Besides, Ukrainian UkrGazEnergo, affiliated with Gazprom, will now sell gas directly to consumers except the housing sector and households. More importantly, Gazprom has preserved the crucial clause of the January agreement, which sets the price for Russian gas transit across Ukraine for five years. At the same time, ...