February 2, 2008 / 3:22 PM / 12 years ago

UPDATE 1-Ukraine to halt use of gas intermediaries-PM

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By Natalya Zinets

KIEV, Feb 2 (Reuters) - Ukraine is to halt gradually the use of all intermediaries in importing gas as they are ineffective and destructive to the country’s industry, Prime Minister Yulia Tymoshenko said on Saturday.

Tymoshenko, long an opponent of intermediaries, said the National Security and Defence Council, chaired by President Viktor Yushchenko, took the decision on Friday. Intermediaries include the Swiss company RosUkrEnergo which supplies gas from Russia.

“A decision was taken to move away from the services of the companies RosUkrEnergo ... and other intermediaries, which are absolutely ineffective and destructive for Ukraine’s gas transport system, and to move towards direct contracts,” she told a news conference.

Talks on the matter, she said, would “involve the government and will take place gradually in order not to destabilise any of the processes, including the transport of gas across Ukraine’s territory and transit”.

She gave no indication with whom the talks would be held or over what period.

“The president supported the start of talks by the government with countries which, in one way or another, deal with Ukraine in terms of supplying gas,” she said. “I cannot tell you now how long this will take. We will perhaps be able to do this after at least the first round of talks is completed.”

RosUkrEnergo has been in place as a supply intermediary since Russian gas giant Gazprom (GAZP.MM) imposed the first in a series of steep increases in the price of gas for Ukraine in early 2006. A price dispute then briefly halted supplies and disrupted flows to Gazprom’s European customers.

Tymoshenko, back in office after a troubled seven months as premier in 2005, has long accused the company of being a front for corrupt business practices.

Since returning to power late last year, she has vowed to do away with it and other intermediaries, and also to discuss the possibility of raising tariffs for gas transiting through Ukraine to western Europe.

She has also vowed to ensure good relations with Russia instead of the turbulent links of her first mandate. She is to visit Moscow later this month.

Tymoshenko said that once RosUkrEnergo was abandoned, the financially-troubled national gas and oil company Naftogaz would have its right restored to generate income by distributing gas on the domestic market.

“We believe that these agreements (with RosUkrEnergo) have signs of corruption, are anti-market and destroy the interests of Naftogaz and of our country,” she said. “All these arguments will be used to break off these agreements and prove in court that the actions of our government are correct.” (Writing by Ron Popeski; editing by David Stamp)

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