Putin to Visit Ukraine Amid Disagreements on Gas Price, Volumes

Russian President Vladimir Putin will discuss natural-gas supplies during a visit to Ukraine amid disagreements between the neighbors similar to those that have previously disrupted deliveries to the European Union.

Putin and his Ukrainian counterpart Viktor Yanukovych, meeting tomorrow in the Black Sea resort of Yalta, plan to review energy ties as the countries are preparing a new accord to expand cooperation in the gas industry, the Kremlin said in documents distributed to reporters in Moscow today.

While as many as 12 documents will be signed, including an accord on nuclear energy, no agreements on gas are planned, Yuri Ushakov, who advises Putin on foreign policy, told reporters. OAO Gazprom (GAZP) Chief Executive Officer Alexey Miller will also travel as part of the delegation, he said.

Yanukovych has refused International Monetary Fund demands to raise household natural-gas tariffs for households to stem losses at state energy company NAK Naftogaz Ukrainy. The former Soviet republic is seeking a discount on its existing 10-year gas-supply agreement with Russia, which Yanukovych calls “very unfair.”

Gazprom made a $2 billion advance payment for transit of gas to the EU last month to help Ukraine buy the fuel for storage. Ukraine, which relies on Russia for more than 70 percent of its gas and serves as a transit route to supply EU buyers, has sought to cut purchases to 27 billion cubic meters this year while arguing the price it pays is too high.

Gazprom has said lowering volumes would violate the contract signed after a price dispute led Russia to cut supplies to Ukraine for almost three weeks in January 2009, disrupting EU exports.

Gazprom Concerns

The Moscow-based gas exporter is concerned that the amount and speed of pumping gas in Ukraine’s storage, urging NAK Naftogaz Ukrainy to ensure sufficient volumes in its facilities ahead of peak consumption in winter, Miller said on June 29. The contract requires Naftogaz to buy at least 80 percent from the annual contracted volume of 52 billion cubic meters.

Putin and Yanukovych may also discuss Ukraine’s jailed opposition leader Yulia Tymoshenko as they “touch upon any issues, including the most sensitive ones,” Ushakov said.

Tymoshenko was found guilty last year of overstepping her authority as premier when signing the 2009 gas deal with Russia. She says the case was engineered by Yanukovych to silence opposition before parliamentary elections in October. The EU, the U.S, and Russia have condemned her conviction.

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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