Medvedev Warns Ukraine on Gas Prices

ST. PETERSBURG -- President Dmitry Medvedev said Friday that the price Ukraine pays for natural gas would rise "significantly" at the start of next year.

Medvedev informed Ukrainian President Viktor Yushchenko at a meeting during a gathering of Commonwealth of Independent States leaders on the eve of the St. Petersburg International Economic Forum, Foreign Minister Sergei Lavrov told reporters.

Next year, "Central Asian countries will shift to European prices," Lavrov said. "Gas from Central Asia forms a considerable part of the gas balance for Ukraine. Medvedev reminded Yushchenko that this will happen from Jan. 1. The price for gas for Ukraine will significantly increase."

Central Asian natural gas producers have demanded that gas export monopoly Gazprom pay "European prices" for their fuel, which would also raise costs for Ukraine. Gazprom has twice curbed supplies to Ukraine since 2006 amid price disputes, sparking concerns over energy security in Europe. Around 80 percent of Europe's gas imports from Russia cross Ukraine.

Lavrov said Ukraine's gas price may double, Interfax reported.

Russia will allow Ukraine's state energy company, Naftogaz Ukrainy, to join Gazprom in talks with Central Asian gas exporters, Yushchenko said in a statement after talks with Medvedev.

"Lavrov's statement on the gas price is more political than economic," Naftogaz spokesman Valentyn Zemlyanskyi said by telephone from Kiev. "The statement arises from the recent worsening of relations between Ukraine and Russia." Preliminary prices may be announced in July, he said.

Yushchenko replied that "the sooner we shift to market prices, the better it will be for the development of a healthy economy," Lavrov said.

The demand from Kazakhstan, Uzbekistan and Turkmenistan for higher gas prices is non-negotiable, Gazprom chief executive Alexei Miller told then-President Vladimir Putin, Interfax reported on March 14.

In a March 13 agreement, Gazprom agreed to deliver at least 49.8 billion cubic meters of Central Asian gas at a price of $179.50 per 1,000 cubic meters from March through December. Ukraine agreed to pay the equivalent of $315 per 1,000 cubic meters of Russian gas supplied in the first two months of the year by "returning" the volumes to Gazprom.

Ukraine gets about 70 percent of its gas via Russian pipelines. The March agreement ended a dispute with Gazprom over debt and middlemen. Gazprom had briefly curbed supplies to Ukraine before the deal was reached, raising concern that deliveries for Europe could be affected as they were during a similar dispute in January 2006.

Medvedev served as the chairman of Gazprom for more than six years and remains its nominal head after ceding his active role on the board following his inauguration as president on May 7.