Ukrainian ? Russian Gas Negotiations Still At A Standstill.

Neither side has given any official comments on the first round of the negotiations that would have clarified the issue. According to unofficial information, Gazprom insists on raising gas prices for Ukraine in quarterly increments to USD 150 per 1,000 cm by the end of 2006. In turn, Gazprom would increase its gas transit through Ukraine?s territory, which would allow Ukraine to receive additional proceeds from transit fees. However, the Ukrainian side strongly opposes Gazprom?s suggestions and wants to stick with the existing agreement the companies made that fixes gas prices at USD 50 per 1,000 cm until 2013. Ukraine would like a compromise that would see gas prices rise gradually to USD 150 per 1,000 cm in 2013. Gazprom is willing to compromise if it is allowed to manage Ukraine?s gas-main pipelines together with Ukraine. Ukraine is looking to hedge its position by considering the purchase of a 50% stake in gas delivery operator RosUkrEnergo, which would allow Ukraine to share in its gas export revenues. The next round of negotiations is to be held in early September, the most likely outcome of which, in our view, will be some compromise with gas prices fixed near USD 80 ? 115 per 1,000 cm in the medium term.

Ukraine plans to import 68 bln cm of gas in 2006. Import of Russian gas will comprise 29 blm cm, and gas import from Turkmenistan will be 39 bln cm.