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REFILE-UPDATE2-Ukraine offers Russia key role in gas pipe revamp
April 29, 2009 / 2:30 PM / 9 years ago

REFILE-UPDATE2-Ukraine offers Russia key role in gas pipe revamp

* Kiev asks Russia to be key partner in EU-backed overhaul

* Russia waives $2 bln fine against Kiev for unused gas

* Talks on $5 bln loan to fill gas storage must go on -Putin

* Moscow, Kiev to sign nuclear cooperation deal by July 15

(Recasts with conclusion of talks, refile changes day to Wednesday)

By Simon Shuster

MOSCOW, April 29 (Reuters) - Ukraine welcomed Russia as a key partner in the EU-backed renewal of its gas pipeline network on Wednesday, and Moscow in turn agreed not to exact a $2 billion fine against Kiev for using less gas than agreed.

The talks appeared to settle a dispute that enraged Russia’s government in March, when Ukraine signed a deal with the European Union to overhaul its pipeline network, which carries Russian gas exports to Europe, without first consulting Moscow.

Russia had a bristling reaction to the agreement, calling it “an unfriendly act” that threatened previous gas supply deals.

“I think everyone understands that it is impossible to modernise the gas transport system without Russia’s participation,” Ukrainian Prime Minister Yulia Tymoshenko said after talks in Moscow.

“We have invited Russia to be a key partner in the modernisation of our gas transport system,” she said, adding that Russia could take part in everything from technology supplies to initial measurements.

Not once during the press conference did Tymoshenko discuss Europe’s role in the gas network renewal. She said that third parties would be invited to take part “if this or that technology is not produced by either Russia or Ukraine”.

Asked about Moscow’s future role in managing Ukraine’s pipelines, Putin testily said that Russia had no such ambitions. “We are not vying to manage them” he said.

Europe, which depends on Russia for a quarter of its gas, is closely watching the turbulent relations between Moscow and Kiev for signs of any future threat to European energy security.

NO FINES

Putin, appearing tired but satisfied after six hours of talks, said Russia would not impose fines on Ukraine for using less gas than agreed in January, even though their supply contract allows for the sanctions.

“The volume of fines that Russian could have demanded from Ukraine for non-use of gas to which it committed for consumption in April was $2 billion. These sanctions will not be imposed,” Putin told reporters.

An industrial slump brought on by the global financial crisis has forced Ukraine to consume less Russian fuel than laid out in its contract, which is set out on a take-or-pay basis that requires payment even if the gas is not used.

“We decided with our partners that the situation is not linked to some slipshod attitude toward our agreements, but to objective crisis-related factors,” Putin said.

This was the first time Putin and Tymoshenko had met since resolving a bitter gas dispute in January that cut off supplies to millions of European consumers for weeks in the middle of a cold spell.

NO LOAN DEAL

The former Soviet neighbours failed, however, to reach a deal on a $5 billion loan that Ukraine needs to fill its gas storage facilities, which serve Europe in winter.

Russia put the loan on hold in response to Kiev’s deal with Brussels, which some analysts viewed as costing Tymoshenko Putin’s trust.

“So far there is no final decision on (the loan). There is an understanding as to the direction these consultations need to go from here,” Putin said.

He explained that Ukraine storage bunkers require 19-20 billion cubic meters of natural gas, which would cost $5 billion. Putin went on to question Europe’s ability to help Ukraine get this money.

“No-one is going to bring them this gas in buckets,” he said in answer to a reporter’s questions. “Why not go to Brussels, take the $5 billion and pay Gazprom?” he added, referring to Russia’s gas export monopoly (GAZP.MM).

Further tightening their energy relationship, Tymoshenko said Ukraine would sign a deal with Russia before July 15 to cooperate in the field of atomic energy over the next 10 years. (Editing by Anthony Barker)

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