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Updated Monday, January 19, 2009 9:32 am TWN, By JIM HEINTZ, AP



	Russian Prime Minister Vladimir Putin, right, looks at his Ukrainian counterpart Yulia Tymoshenko as they speak to the media early Sunday, Jan. 18, shortly after their talks aimed at restoring Russian natural gas supplies to Europe. (AP) Enlarge Photo

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Russia, Ukraine reach gas deal; Europe still waits

Russia has won a key principle, however, that Ukraine must pay more for its energy supplies. In the long term, it is not clear how Ukraine will pay for the huge amount of Russian gas needed to run its outdated factories and heating systems.

Ukraine also appeared to have won one of its goals - the elimination of a shadowy middleman company through which Gazprom sold gas to Ukraine. The intermediary company, half-owned by Gazprom, has been criticized as an alleged vehicle for siphoning gas profits into private pockets.

A Kremlin official, speaking on customary condition of anonymity, said the contract between Gazprom and Naftogaz for 2009 would be "direct."

Moscow and Kiev, which spent the last two weeks blaming each other, managed to wound both their images in the energy debacle.

"The best part for Russia is they get the gas to the customers. This has been pretty damaging" to Russia's reputation as a reliable energy partner, Smith said Sunday. "(Ukraine) probably lost as well, because the European Union was looking at them as a possible member and may now be wondering if it's worth the effort."

Russia also emerged without having to pay a higher gas transit price in 2009.

Putin said Russia was giving Ukraine the "20 percent discount" on the condition the gas transit price does not change for 2009. Beginning next Jan. 1, however, Ukraine will pay full price for gas and Russia will pay market prices for transit, he said.

Russia currently pays $1.70 to transport 1,000 cubic meters of gas 100 kilometers, which last year amounted to close to $3 billion for Ukraine. Putin says the market price is about double that.

Putin and Tymoshenko made no mention of the more than $600 million that Gazprom claims Ukraine still owes for 2008.

The global economic crisis has hit both former Soviet republics hard.

With the dramatic fall in the price of oil - the country's main source of revenue - Russia is facing a budget deficit this year for the first time in a decade. Industrial production has slowed and the ruble has lost nearly 30 percent of its value since summer.

Ukraine's economy is in even worse shape, battered by the drop in world prices for steel and heading into a painful recession.

The two neighbors have been at odds since the 2004 Orange Revolution brought Ukrainian President Viktor Yushchenko to power. His avid push for Ukraine to join NATO and the EU has angered Moscow.

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Comments

January 19, 2009 groves_e@

Putin should be removed from his post. Russians using gas as a political tool against Ukraine and the EU...no one can trust them. The EU needs Nabuko project or some alternative routes.