When Gas Contracts Are Criminal
Claiming that her actions cost the state some $440m in losses, Ukrainian prosecutors have charged former prime minister Yulia Tymoshenko with illegally brokering a natural gas supply agreement with Russia in 2009.
“An investigation has been completed in a criminal case in which Yulia Tymoshenko is charged with a crime ... exceeding authority,” Ukraine’s General Prosecutor’s Office said in a Tuesday statement.
Currently opposition leader, Tymoshenko has repeatedly denied any wrongdoing, saying the charges against her are politically motivated by her opponent President Viktor Yanukovich who wants to ban her from taking part in future parliamentary elections.
The Yanukovich, administration claims the agreement between Tymoshenko and her then Russian counterpart, Vladimir Putin, placed Ukraine in a precarious position due to high gas import prices.
That agreement ended a stand-off that had briefly disrupted Russian gas flows to Europe. It tied the price of gas to Ukraine from Russia's Gazprom to spot oil prices.
Following his victory over Tymoshenko, Yanukovych and Russian President Dmitry Medvedev agreed to a 30 percent discount on the gas price of $330 per 1,000 cubic meters, which stemmed from the Tymoshenko -Putin agreement.
In return for the deal valued at $40 billion over ten years, Ukraine agreed to extend Russia’s lease on a naval base in the Black Sea.
Even with that discount, fuel costs are squeezing the Ukrainian economy and Ukraine is pressing Russia for relief.
Ukraine pays about $297 per 1,000 cubic metres for Russian gas. Pegged to global oil prices, the rate is set to surge to $400 later this year.
Gazprom Chief Executive Officer Alexei Miller met on Tuesday with Ukraine's Energy Minister Yuri Boiko in Kiev to discuss prices for natural gas deliveries to Ukraine.
"We need to find mutually beneficial solutions and use them to build our relations," Russian news agency Interfax quoted Ukraine's President Viktor Yanukovych as saying in response to meeting.
Natural gas that is perhaps the most critical issue in relations between the two countries.
Russia covets Ukraine's Naftogaz Ukrainy distribution network through which 80% of Russia’s gas exports to Europe pass and is proposing a merger of Gazprom and Naftogaz.
In a bid to sweeten the deal, Russia had said it would drastically reduce its export gas price for Ukraine to a level at which gas is delivered to the Russian households,” said Miller.
The difference in pricing is vast. Russian customers pay around $60 for 1,000 cubic meters of gas,