Putin Lauds Ukraine's Gas Payments

APPrime Ministers Yulia Tymoshenko and Vladimir Putin getting ready to begin their talks in Moscow on Saturday.
Prime Minister Vladimir Putin on Saturday praised Ukraine for making timely payments for its gas supplies this year during new pricing talks and welcomed a pledge to host Russia's Black Sea Fleet until 2017.

"For the first time in many years, there is no debt on ongoing payments between Russian suppliers and Ukrainian energy consumers," Putin told a news conference after talks with Ukrainian Prime Minister Yulia Tymoshenko.

The comments came after Gazprom chief executive Alexei Miller said Friday that prices for Ukraine would most likely rise to more than $400 per 1,000 cubic meters, from $179.5 this year.

Putin blamed Central Asian producers Turkmenistan and Uzbekistan, whose fuel Gazprom supplies to Ukraine, for possible price increases. He said the gas price had become "excessively politicized" and that it was an "economic issue" that should be decided by the companies involved, not governments.

"We would like to move to the European price formation principles for Ukraine gradually, but you know the position of our partners in Central Asia, who want to raise prices from January 1 of next year," Putin said.

"We are in the process of negotiations. It is too early to talk about the outcome," Putin added.

Analysts are watching the Russian-Ukrainian gas talks because Gazprom supplies one-quarter of the European Union's gas needs mainly through the territory of Ukraine.

A pricing dispute in January 2006 led to major disruptions of Russian gas supplies to Europe for several days in the middle of winter.

Tymoshenko said Ukraine would stick to an agreement to host Russia's Black Sea Fleet until 2017, despite its bid to join NATO, and will not take any unilateral action to push Russia from the naval base earlier.

Ukrainian President Viktor Yushchenko in May ordered his government to prepare a bill formally ending Russia's presence in the naval base in Sevastopol, on the Crimean Peninsula, in 2017.

"We have an agreement until 2017 and this agreement will be observed as Ukraine's other international agreements, very accurately and without any deviations," Tymoshenko told the news conference.

Under the current lease deal, the deployment of the Black Sea Fleet in Ukraine could be prolonged by another five years if both sides agree. Russia pays Ukraine about $100 million in rent a year.

"I would like to thank Ms. Tymoshenko for these words. Any unilateral action in this issue we consider destructive," Putin said. He said Moscow might reduce its military cooperation with Ukraine if it joins NATO.

Ukraine has a major arms and electronics industry inherited from the Soviet era, which relies on contracts with Russia's military and space agencies. The industry remains state-owned and poorly adjusted to business-oriented relations with the West.

"When it comes to security-sensitive technologies ... such production will be moved to the territory of the Russian Federation despite costs," Putin said, referring mainly to Ukrainian-made engines in its cruise missiles.

Putin said Ukraine would have to invest heavily into retrofitting its arms industry for production of weapons according to the Western alliance's standards.