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. Last Updated: 07/27/2016

Tension Rises Over Gas Deal as Deadline Looms

Tension continued to mount on Monday over whether Ukraine would sign its long-awaited agreement with Gazprom and Swiss-registered trader Rosukrenergo by Tuesday's deadline.

While Ukrainian state gas company Naftogaz Ukrainy said it expected to meet the deadline, Prime Minister Yuriy Yekhanurov said the secretive Rosukrenergo had to reveal more about its business first.

Under the controversial Jan. 4 deal, which ended a Russian-Ukrainian standoff over prices, Naftogaz Ukrainy was meant to create by Feb. 1 a joint venture between itself and Rosukrenergo to distribute gas within Ukraine. But the signing of that deal has already been postponed twice amid mounting political opposition and growing questions over who the real beneficiaries of Rosukrenergo are. Half of the trader is owned by Gazprom, while the other half is held by Raiffeisen Bank on behalf of unknown beneficiaries.

On Sunday, former Ukrainian Prime Minister Yulia Tymoshenko again lashed out at the deal and claimed in a television interview that officials from Naftogaz Ukrainy had secretly signed off on the deal in the early hours Saturday.

While Naftogaz Ukrainy on Monday denied the claim, Interfax cited Yekhanurov as saying his government would not sign off on the deal until Rosukrenergo had made a presentation. "As soon as the presentation takes place, quick action will begin," he said, Interfax reported.

Yekhanurov has called for greater transparency from Rosukrenergo since the Jan. 4 agreement.

But he did not elaborate on what the presentation should entail. Meanwhile, Naftogaz Ukrainy spokesman Dmitry Marunich said that a presentation had been planned from the start. He could not say whether the ownership of Rosukrenergo would be disclosed.

"It is expected that the agreement will be signed tomorrow," Marunich said by telephone from Kiev.

But others said growing opposition within Ukraine was making it politically impossible for the government to agree to sign it.

"The deal will break apart," said Anders Aslund, a senior fellow at the Washington-based Institute for International Economics, who recently returned from Kiev. "Ukraine has a stronger negotiating position than Gazprom."

Saying he had met with senior Ukrainian officials during his trip, he said the Ukrainian government no longer needed to agree to the deal.

"Without Ukraine, Gazprom's gas is worthless," Aslund said, referring to Ukraine's role as a transit state for 80 percent of Gazprom's shipments to Europe. He said taking a stand against Russia would enhance Ukrainian President Viktor Yushchenko's stature ahead of vital parliamentary elections, while Russia could not cut off gas to Ukraine for longer than two days without endangering the pipeline system. "Russia has overplayed its hand," he said.