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. Last Updated: 07/27/2016

Ukraine Says It Will Not Buy Any Gas From Russia

Naftogaz Ukrainy on Tuesday defended its controversial deal with Gazprom, saying it would not take any gas from Russia and that all its imports would instead come from Central Asia.

A spokesman for the Ukrainian state gas company said the country's gas consumption needs would be fully met by the 56 billion cubic meters it was due to receive from Central Asian nations via gas trader Rosukrenergo.

Under that deal, the secretive Swiss-registered gas trader agreed to buy 17 bcm of gas from Gazprom at $230 per 1,000 cubic meters, the fourfold hike in prices Russia had been insisting on for Ukraine, while it would buy another 41 bcm from Turkmenistan and up to 15 bcm from Kazakhstan and Uzbekistan at about $55 per 1,000 cubic meters.

The deal has provoked an uproar among Ukrainian politicians for boosting the average price Ukraine has to pay for its gas to $95 per 1,000 cubic meters, and for allowing Russia to say it was selling gas for $230 per 1,000 cubic meters.

Led by former Prime Minister Yulia Tymoshenko, Ukraine's parliament on Tuesday voted to fire the Cabinet over the deal, but President Viktor Yushchenko vowed to challenge the vote in the Constitutional Court.

Prime Minister Yuriy Yekhanurov said he would do his utmost to make sure the deal was not scrapped.

Once Ukraine's own annual gas production of 20 bcm is added to the mix, Ukraine does not need to buy any of the Russian gas sold to Rosukrenergo for $230 per 1,000 cubic meters, said Naftogaz Ukrainy spokesman Dmitry Marunich.

"Under such a scheme, we do not need any Russian gas," he said, adding that once Rosukrenergo had bought the expensive 17 bcm from Gazprom it could "do what it wants with it." Ukraine consumes about 75 bcm annually, he said.

A Rosukrenergo official, Wolfgang Putschek, has said the trader expects to have 10 to 15 bcm left over from the deal.

Putschek said the trader wanted to export that amount to Europe, a step that would allow it to potentially triple its current European exports of 5 bcm per year.

Rosukrenergo is expected to post profits from last year of $500 million, and that figure could climb this year following last week's deal, Putschek said.

Rosukrenergo is 50 percent-owned by Gazprombank, a unit of Gazprom, while the other 50 percent is held in a trust run by Austria's Raiffeisen Zentralbank. Raiffeissen has said it will not disclose who the beneficiaries of the trust are.

Putschek said the deal would allow Rosukrenergo to buy all the gas for an average of $90 per 1,000 cubic meters. After selling up to 56 bcm to Ukraine for $95 per 1,000 cubic meters, it could potentially make much bigger profits on exporting the rest.

Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies, agreed that the deal made it unlikely that Russian gas would be sold to Ukraine.

"It was simple, really, but it took us so long to work it out. With this, Gazprom was saying, 'We are not going to supply you with gas anymore,'" he said. "It's all going to come from Central Asia via Rosukrenergo."