Ukraine and Russia fail to mend growing gas rift

Russia and Ukraine failed to end their rift during high-level talks yesterday on a flaring gas row that raised fears of a disruption of supplies to Europe for the second time in three years.

Ukrainian Foreign Minister Kostyantyn Gryshchenko flatly rejected the idea of his country becoming a full member of a customs union led by Russia which Moscow had said could see Kiev enjoying the lower gas prices it has demanded.

“We feel that today, unfortunately, there are no real opportunities for (Ukraine’s) full-fledged membership in the customs union,” Mr Gryshchenko told reporters after talks with his Russian counterpart Sergei Lavrov.

Mr Lavrov for his part stressed that Russia expected Ukraine to honour its existing gas contracts despite an earlier threat by Kiev to tear up the disputed 10-year deal.

“We are guided by the generally-accepted principle of respecting international obligations, including both contracts and inter-governmental agreements,” said Mr Lavrov.

The two sides have been engaged in an increasingly bitter war of words over a gas contract Ukraine signed in January 2009 after having its supplies cut off in a Kremlin move that also impacted parts of Europe.

The dispute also damaged the credibility of Russia – which provides about a quarter of the gas consumed in the EU – as a reliable partner and prompted the Kremlin to push ahead with plans to build new pipelines bypassing Ukraine.

Kiev now argues that the $400 it expects to start paying for 1,000 cubic metres of gas later this year is more than rich European nations such as Germany and a form of political pressure from Moscow.

“It (the gas) costs something closer to $230 per 1,000 cubic metres, this would be an objective price,” the state Naftogaz energy firm chief Yevgeny Bakulin was quoted as saying by Interfax.

Moscow failed to immediately respond to the offer but Ukrainian President Viktor Yanukovych and his Russian counterpart Dmitry Medvedev briefly met on the sidelines of a regional summit on Saturday without reporting progress.

Kiev has also brushed aside Moscow’s suggestion that it cede control of its state energy company in exchange for lower prices and instead vowed to reduce Russian gas purchases in the years to come. Such a decision could be challenged by Russia because Ukraine is committed to buying a certain quantity of gas every year under the existing deal.