MOSCOW/KYIV, Dec 13 (Reuters) - Moscow and Kyiv are considering a deal to divide control of Ukraine's pipelines between themselves, excluding European participation from a deal aimed at securing gas supplies to European consumers, Russian and Ukrainian media reported.
A spokesman for Russia’s gas export monopoly Gazprom declined to comment on Tuesday. Ukrainian state energy firm Naftogaz was not immediately available.
Gazprom Chief Executive Alexei Miller met Ukrainian Energy Minister Yury Boiko on Monday, Gazprom said in a statement.
Joint control of the transit pipelines, which carry Russian gas to Europe through the territory of the former Soviet republic, is seen as a way to preclude their use as a bargaining chip in price conflicts between Russia and Ukraine, which depends on Russia for almost all of its gas.
Direct European participation in a pipeline deal had appeared possible. Ukrainian Prime Minister Mykola Azarov said earlier they had discussed a 40-40 division of control between Russia and Ukraine, with a European entity as a third party.
Russian and EU leaders will meet for a summit in Brussels on Thursday which is expected to focus on fiscal stability in the eurozone, but gas pipelines are a perennial topic between Brussels and the country which supplies over a quarter of Europe’s gas.
Gas flows to Europe via Ukraine were cut off in 2006 and 2009 when price talks between Moscow and Kiev failed. The EU also faces Russian resistance to pipeline access rules designed to stop producers monopolising transport routes.
Until the November launch of the Nord Stream pipeline, a subsea route which goes directly from Russia to Germany, Ukraine handled around 80 percent of the roughly 140 billion cubic metres. Nord Stream will reduce that by 20-25 bcm per year.
Russia’s Kommersant daily cited sources on Tuesday as saying Gazprom and Ukraine were in talks on joint control over their pipelines.
It quoted Gazprom’s chief executive as saying a deal was unlikely to be concluded before the end of the year, a blow to Kiev’s plans to cut fiscal and current account deficits next year by securing cheaper gas supplies.
The Kommersant story followed a report in Ukrainian weekly Zerkalo Nedeli, which said that the deal on offer involved two 50-50 joint ventures: one to control the trunk pipeline and a second to control the distribution networks.
Zerkalo Nedeli said they were discussing the inclusion of Ukraine’s underground gas storage facilities, but Ukraine opposed handing them over to a jointly controlled entity.
The European Union, which is trying to ease its dependence on Russian gas supplies, will hardly welcome a deal giving Gazprom control over Ukrainian gas pipelines.
EU CONCERNS
European Commissioner for Enlargement and European Neighborhood Policy Stefan Fule, who was in Kiev on Tuesday, said in a statement he had discussed the issue during a meeting with President Viktor Yanukovich.
“We also had useful exchanges on issues related to economic governance and on the need to improve the business environment, including on the necessity for Ukraine to secure a fair and market-oriented price for gas and to ensure full compliance with its commitments and obligations as a member of the Energy Community,” Fule said.
Ukraine this year pledged to adopt EU energy regulations aimed at preventing foreign companies from taking over its energy transit systems.
However, Kiev, coping with rising debt and a big trade deficit, is struggling to pay its gas bill and stands to win a price cut in the deal, as neighbouring Belarus did when it completed the sale of its pipeline company, Beltransgaz, to Russia for $5 billion.
Russian Prime Minister Vladimir Putin, who has called the break-up of the Soviet Union a tragedy for much of its population, called a 40 percent cut in the gas price to Belarus an “integration discount”. Russian domestic prices remain far below European ones.
Putin is preparing to mount a bid for a return to the presidency in a March election while his party faces protests over reports of ballot fraud in a Dec. 4 election which returned a majority to his United Russia party.
