Russia, Ukraine reach accord on gas price

Russia and Ukraine have resolved a longstanding dispute over natural gas prices with a deal extending Russian military presence in its former satellite by 25 years.

By OGJ editors
HOUSTON, Apr. 22
-- Russia and Ukraine have resolved a longstanding dispute over natural gas prices with a deal extending Russian military presence in its former satellite by 25 years.

Under the former, 10-year deal negotiated by the former Ukrainian government of western-leaning Viktor Yushchenko, Ukraine has been paying more than $300/1,000 cu m for Russian gas.

The new deal, negotiated by a government friendlier to Russia headed by new President Viktor Yanukovych, provides a discount of $100/1,000 cu m when the price is higher than $330/1,000 cu m and of 30% when the price is less.

According to the Russian newspaper RIA Novosti, the discount applies to 30 billion cu m of Russian gas supplied to Ukraine and to 40 billion cu m/year in 2011-12.

Ukraine had been trying to lower contract volumes from 42 billion cu m in 2009 (OGJ, Dec. 7, 2009, p. 56). Novosti said the earlier contract volume for this year was 36.5 billion cu m.

In past price disputes, Russia has halted pipeline deliveries to Ukraine, an important transit country for gas bound for Europe.

In exchange for gas-price relief, Ukraine extended Russia’s lease on a base in Crimea for the larger country’s Black Sea Fleet.

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