Ukraine's push for natural gas contract - ResearchInChina

Date:2008-09-24liaoyan  Text Size:

UKRAINE President Viktor Yushchenko urged the country's government to sign a contract for natural-gas shipments from Russia's OAO Gazprom for domestic use in 2009, a move that would ensure stability of flows to Europe.

"These talks should be finished as soon as possible," Yushchenko said in an interview in New York yesterday, Bloomberg News reported. "We should not wait until December, because December is when the political component dominates."

The European Union gets a quarter of its gas from Russia, 80 percent of which is shipped across Ukraine. Since 2006, Russia's gas-export monopoly Gazprom has reduced flows to Ukraine twice during pricing disputes, raising EU concerns that Russia is unreliable as an energy supplier.

Ukraine's state-run energy company NAK Naftogaz Ukrainy said on September 16 it may delay signing the agreement on 2009 gas supplies with Gazprom until the end of the year because falling oil and gas costs may result in a better price. Ukraine may be forced to tap supplies destined for Europe if a deal isn't signed.

Volatility

"Banking on the idea that oil prices will drop makes little sense," Nick Piazza, an analyst at Galt & Taggart Securities Ukraine, said in an interview from Kiev.

"We are likely to see an incredible amount of volatility in commodity prices over the next three months. Beginning work on a long-term agreement now would certainly be welcomed by investors the last thing anyone wants to see this Christmas is another gas standoff."

Russia, the world's largest gas and second-largest oil exporter, cut off gas supplies to Ukraine at the beginning of 2006 and reduced deliveries by 50 percent this March. The country also halted shipments of crude oil to Belarus last year.

Government officials in Ukraine and Belarus have repeatedly said Russia is using its energy resources to wield influence over its former Soviet satellites, accusations Russia has denied. Yushchenko said he told Gazprom Chief Executive Officer Alexei Miller in July that Ukraine wants to sign the agreement sooner rather than later, in part because affordable gas is "crucial" for Ukrainian industries such as metallurgy and chemical production.

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