MOSCOW. (Igor Tomberg for RIA Novosti) - At the end of October, Rosukrenergo AG and Ukrgazenergo signed an annex to the treaty on purchase/sale of gas for 2006-2010 dated February 2, 2006.
Under this agreement, Ukraine will receive at least 55 billion cu m of Central Asian gas at $130 per 1,000 cu m next year, Rosukrenergo said in a statement. Given own production, it will fully meet Ukrainian gas demand.
"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," the statement reads. Under Russian-Ukrainian agreements, Kiev is buying gas from Rosukrenergo at $95 per 1,000 cu m 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 per 1,000 cu m, and the Baltic countries from $160 to $200. Georgia, Armenia and Azerbaijan at present buy gas at $110, but Gazprom, the Russian state-owned gas monopoly, intends to revise them next year. Georgia expects prices to rise to $170-$260. 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, gas prices for Ukraine are not related to the cost of transit. Orange opposition believes that Gazprom has had an upper hand in the talks. Somehow those who criticize the arrangement seem to forget that Central Asian gas for Ukraine is pumped through Russian pipelines. Given that, the parties fixed "mirror" transit tariffs, which are relatively low compared with Europe. Given the distance, there is no doubt who stands to lose more from an increase in shipment tariffs.
Leaving aside the numerous guesses on the political price Ukraine has to pay for inexpensive gas (such as the referendum on NATO accession), it is worth considering how the achieved agreement may influence the two countries' neighbors. Clearly, the peaceful resolution of the gas supply problem is beneficial for Moldova, which is also a transit country. It is very unlikely that the price for Moldova will be lowered from the current $160, but stabilization of gas flows via Ukraine makes it easier for Moldovan negotiators to achieve their key goal of ensuring guaranteed long-term gas supply. Moldova hopes to sign an agreement with Russia for at least five years later this month, setting the gas price at the current level.
As to current gas prices, a delegation of the International Monetary Fund studied the situation in the Moldovan economy last July and considered potential consequences of an energy price hike. It acknowledged that Gazprom had subsidized the country by selling it gas at prices that were lower than global ones. The current $160 is no longer a subsidy, but is still much lower than $250 paid by European countries. The gas boom in Europe supported by forecasts of its shortages can push the prices even higher. In this case, the agreed $160 will prove extremely favorable for the buyer. It was no coincidence that Moldovan President Vladimir Voronin said in an interview with the BBC Radio in Chisinau on August 29 that "gas in Moldova will cost as much as Gazprom asks." This shows that the country's leader has a realistic view of the situation.
At present, Moldova is considering a scheme for stabilizing gas prices for 2007-2010, which envisages construction of new power generation capacities and electricity exports to Europe on a par with Gazprom. Obviously, it is easier to discuss prices with a partner you already have joint projects with. So it is beneficial for Moldova to view gas cooperation with Russia in a broader context of launching joint projects in different sectors.
Dr. Igor Tomberg is a senior research fellow at the Center for Energy Studies, Institute of World Economy and International Relations, Russian Academy of Sciences.
The opinions expressed in this article are those of the author and may not necessarily represent those of RIA Novosti.
