Ukraine Unsatisfied with Gas Agreement with Russia

Ukrainian authorities indicated on Wednesday, that they are ready to denounce a natural gas agreement with Russia that was signed last month amid persistent differences in the way Moscow and Kiev believe the agreement should be implemented, MosNews reported.

Prime Minister Yuri Yekhanurov, opening a government meeting on Wednesday, suggested that Russia has been apparently growing unhappy and persistently opposing some parts of the agreement. ?We told the Russian side: We are ready to denounce the agreement or certain clauses in the agreement if it doesn?t satisfy the Russian side, and to prepare the new one,? Yekhanurov said, quoted by the UkrainianJournal.com.

Yekhanurov didn?t disclose what the differences were, but the development comes amid deadlock in talks between the two governments as Russia has been apparently refusing to guarantee steady gas prices during the next five years.

This is the first time Ukraine officially mentioned an option of denouncing the agreement, which was signed on Jan. 4 to end a natural gas dispute that had resulted in disruptions of Russian gas supplies to Europe.

Some Western analysts, such as Bruce Jackson, a former U.S. military intelligence officer and now the president of the Project on Transitional Democracies, have recently encouraged Ukraine to denounce the agreement. Jackson, in an interview with Dzerkalo Tyzhnia weekly that was published on Saturday, Feb. 4, said a new, more transparent agreement should be negotiated between Ukraine and Russia, now involving the European Union.

A person familiar with the situation said the Ukrainian government had already secretly considered an option of denouncing the agreement at a meeting on Feb. 1, but no action had been taken. The next day, on Feb. 2, RosUkrEnergo agreed to stipulate in a contract that it will supply gas to Ukraine at $95 per 1,000 cubic meters during the next five years. However, RosUkrEnergo reserved the right to boost the prices if Turkmenistan, the main gas source for the company, moves to hike the prices.

The issue is sensitive for Ukraine, whose chemical and steel companies would become unprofitable if gas prices exceed $95, analysts said.

Ukraine has been seeking a steady gas price during the next five years to give the companies enough time to modernize and to reduce gas consumption.