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. Last Updated: 07/27/2016

Ukraine Claims Moscow Overstated Pipeline Fee

KIEV -- Prime Minister Viktor Chernomyrdin was "led astray" in his understanding of the recent price hike for pumping oil through Ukraine to Central Europe, a top Ukrainian energy official said.


Alexander Sverdlov, chairman of the Ukrainian State Oil and Gas Committee's transportation department, said his committee received a letter from Chernomyrdin last week saying that Ukraine's New Year's Day tariff increase on oil sent through its section of the Druzhba pipeline went "beyond good neighborly relations." He did not elaborate on the contents of the letter.


But Sverdlov told a press conference that Chernomyrdin inaccurately wrote that the increase raised to $5.20 the cost of sending a ton of oil 100 kilometers through the pipeline. He said in fact it now cost $5.20 to send a ton of crude through the pipeline's full 750-kilometer stretch in Ukraine.


Until Jan. 1, that rate was $4.50. Sverdlov said the Russian Fuel and Energy Ministry was warned of the increase six weeks ahead of time, but waited until Dec. 27 to send a letter opposing it.


The increase must be absorbed in full by trading firms that purchase Russian crude and use the pipeline to sell it on the Central and Western European markets. The Russian Fuel and Energy Ministry finds the increase worrisome, however, because it makes Russian oil less competitive abroad.


The Ukrainian State Oil and Gas Committee refused to allow oil to flow to Slovakia and Hungary during the first week of the year because trading firms refused to sign contracts at the new rate. It said the Russian Fuel and Energy Ministry was pressuring Russian and foreign firms not to accept the increase.


Ukrainian State Oil and Gas Committee Chairman Yevgeny Dovzhok said that, as of Tuesday, 28 firms had signed contracts at the new rate. He dismissed as an empty "ultimatum" a Jan. 12 telegram he received from Russian Fuel and Energy Minister Yury Shafranik demanding the tariff increase be rescinded and talks be held in Moscow.