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5 Mar, 2010 16:36

Ukrainian President’s Moscow trip brings gas to fore again

Newly elected Ukrainian President, Viktor Yanukovich, has made Moscow his first state visit, with the hotly disputed price for gas a key item on the agenda.

Russia and Ukraine are no strangers to rows over gas. Disputes and disruption have been regular events over the past decade.

That’s prompted both Russia and gas consuming countries in Europe to plan new pipelines bypassing Ukraine. For its part, Kyiv has repeatedly demanded price concessions from Moscow. Konstantin Simonov, General Director of the National Energy Safety Fund says Ukraine has been warned repeatedly about moves to market pricing for gas.

"For the last 5 years we can see huge amounts of discussions in Ukraine about the necessity of increasing gas prices and they spoke about this for ages and unfortunately the Ukraine did nothing to renovate its economy, to increase gas prices for common people. So why must we pay for our Slavonic brothers? I don’t understand these reasons."

In 2008 alone, Gazprom waived around $8 billion worth of penalties, after Ukraine consumed less gas than it had contracted to buy. It’s widely thought that the newly-elected President of Ukraine, Viktor Yanukovich, came to Moscow – with yet another request.

For Russia to cut the price of gas to Ukraine – in effect, renegotiating a deal achieved just months ago between the two country’s prime ministers. But President Medvedev was not ready to discuss energy issues until Ukraine’s new government is formed.

"We have agreed that the governments and ministers of both countries will discuss energy cooperation – in gas and other areas."

Ukraine’s ageing, Soviet-era pipeline network is another issue. The EU offered to help update it – but failed to find the money. Kommersant newspaper suggested, Kiev could let Russia run its gas transit system – as part of the negotiations on gas prices. Konstantin Simonov says the need to resolve the issues will remain well into the future.

“It’s impossible to avoid Ukraine in the next 10 to 15 yars, even if we build Nord Stream, even if we build South Stream – we must live with Ukraine.”

For his part, Ukraine’s new president seems more willing to live with Moscow.  But the best intentions still won’t pay the bills. And with its economy in crisis, analysts say Ukraine will struggle to pay its gas bills, whatever the price.