* Ukraine needs lower gas price to secure IMF deal
* Not clear what Kiev will offer in return
* Past disputes disrupted onward flows of gas to Europe
By Olzhas Auyezov
KIEV, Dec 17 Ukraine will try to resolve a gas
price dispute with Russia in presidential-level talks on
Tuesday, heading off any danger of an escalation in the row that
could threaten supplies of the fuel to Europe.
The Kremlin said President Vladimir Putin would receive
Ukraine's President Viktor Yanukovich in Moscow, and political
sources said the Ukrainian leader hoped to secure an agreement
for Kiev to pay a lower price for Russian gas.
There is no sign of the tensions that prompted Russia to cut
supplies to Kiev during earlier price rows in 2006 and 2009, a
move that led to disruption of flows to other markets in Europe
because Russian gas exports go through pipelines across Ukraine.
But Kiev is struggling to afford its fuel bill to Russia
under the current terms, which stem from a 2009 agreement over
which Ukraine's former prime minister, Yulia Tymoshenko, was
jailed on charges of abuse of office.
Kiev says the price of $430 per 1,000 cubic metres it is
paying this quarter is draining its budget, although it has
balked at demands for big concessions to Moscow to achieve a
Russia has, in particular, said it wanted to buy into
Ukrainian gas pipelines which pump much of the Russian gas bound
for Europe. Kiev refuses to sell the assets, considering them to
But pressure is mounting on the former Soviet republic to
reach a deal because the International Monetary Fund says it
must cut generous subsidies on household gas and heating prices
to secure a new loan package that would help it pay its debts.
"Some move to resolve the stalemate is expected and it could
happen tomorrow," Ukrainian political analyst Mykhailo
"Ukraine faces the need to find huge sums of money in order
to repay foreign debts, including to the IMF. This leaves
Ukraine without a choice - they have to go to Moscow and reach
an agreement on gas prices."
LOOMING DEBT PAYMENTS
Ukraine must repay about $9 billion in debt to foreign
creditors next year, including $6.4 billion to the IMF. Two
agencies, Standard and Poor's and Moody's, have cut Ukraine's
ratings this month, citing increased risk of default.
The Fund halted lending to Ukraine in early 2011 after the
government backtracked on its promise to cut household energy
subsidies because of what analysts said were fears of a domestic
The IMF says Kiev must eliminate or at least reduce
subsidies to bring its budget deficit down to a manageable
level. But Ukraine hopes that, if Russian gas becomes cheaper,
subsidies well become either unnecessary or insignificant.
Kommersant-Ukraine newspaper quoted a government source on
Monday as saying Ukraine might invite Russian nuclear company
Rosatom to take over its turbine maker Turboatom in exchange for
a new gas supply agreement.
A source in the Russian Energy Ministry said talks would
focus on Russia's desire to bring Ukraine closer into its orbit
and lure it into a customs union trade bloc led by Moscow.
Although Yanukovich has sought to align Ukraine's foreign
policy with that of Russia since becoming president - for
example, by abandoning the goal of joining the NATO military
alliance - he has said European integration remains Kiev's
But the European Union has shelved agreements with Ukraine
on free trade and political association in response to the
jailing of his rival, Tymoshenko, in October 2011.
Some analysts say Yanukovich's government wants to play off
Russia against the West to try to win concessions from both.
The supply disruptions of 2006 and 2009 caused severe energy
supply problems for countries such as Bulgaria and Slovakia in
the depths of winter.
New disruptions would undermine Ukraine as it tries to
dissuade Moscow from building alternative pipelines along
different routes which could eventually make the Ukrainian