Wednesday, January 04, 2006

MOSCOW (Reuters) - Russia and Ukraine struck a five-year gas supply deal on Wednesday after a bruising pricing dispute in which Moscow curtailed deliveries, hitting supplies to European consumers.

Alexei Miller, chief executive of Russian gas monopoly Gazprom, told a news conference the deal was effective from January 1 and would be based on a price of $230 per 1,000 cubic metres.

"We have reached a final agreement. It is successful for Gazprom and we are satisfied," Miller told reporters after talks with Oleksiy Ivchenko, head of Ukrainian state energy company Naftogaz.

"This agreement will ensure stable supplies to Europe."

But Ivchenko said Ukraine would be buying gas at the Russian border at $95 per 1,000 cubic metres.

"We have reached an initially acceptable agreement which gives us the possibility to meet the gas needs of Ukraine and the transit of Russian gas to Europe," Ivchenko said at the news conference.

A Gazprom source said the $230 price would apply only to exports of Russian gas to Ukraine, up from $50 now. Under a complex deal, Ukraine would be able to buy gas from Turkmenistan and Kazakhstan, piped via Russia, at a cheaper price of $95 per 1,000 cubic metres.

On the surface, it's all clear and nice: they've reached an agreement, and we aren't paying what Gazprom initially wanted us to pay. Europe can relax, too.

But, as noted above, it's a complex deal. The Reuters piece doesn't mention Rosukrenergo as part of the scheme, an intermediary company that will be buying Russian gas from Gazprom for $230 and then selling both Russian and Turkmen gas to Naftogas for $95. A Gazprom affiliate and Austria’s Raiffeisen Investment AG own 50/50 stakes in Rosukrenergo, which, in a way, means that Gazprom will be buying gas from itself. Rosukrenergo is registered in Switzedrland, and Raiffeisen Investment AG has, allegedly, nothing to do with Raiffeisen Bank. Oleksandr Turchynov, former head of SBU and Yulia Tymoshenko's man, launched an investigation into Rosukrenergo in summer 2005, but was not allowed to finish it. More about it in a Kyiv Post piece here, at Kiev Ukraine News Blog.

All parties involved in the scheme will no doubt profit from it, but I have no more time now to try to figure anything out because we have to take Marta for her first monthly appointment with the doctor!

Update: Here's a quote from a Gazprom representative (via Ukrainska Pravda, in Ukrainian):

Rosukrenergo is buying not only Russian gas for $230, but Central Asian gas as well. Central Asian gas is cheaper and there's more of it. By mixing it with Russian gas, it becomes possible for Rosukrenergo to supply gas for Ukraine for $95.

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