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. Last Updated: 07/27/2016

Kiev Says Gas Deal Not Yet Set in Stone

Ukrainian President Viktor Yushchenko's deputy chief of staff cast doubt on the country's new gas deal with Russia on Wednesday, a day after the two countries' prime ministers announced an agreement to raise the gas price by 40 percent next year.

Olexander Chaliy criticized the hike and said it was unclear whether the pro-Western president would sign off on it.

"It's still not clear how the price formula of $130 per thousand cubic meters has been reached," Chaliy told reporters in Kiev, Interfax reported. "It's not clear today whether the intergovernmental agreements will be signed."

Pro-Russian Ukrainian Prime Minister Viktor Yanukovych trumpeted the deal Tuesday as a breakthrough in talks key to ensuring smooth supplies to Ukraine, a crucial transit state to Europe. During a meeting with Prime Minister Mikhail Fradkov, Yanukovych said he had received telephone confirmation that the gas price for Ukraine would be raised to no more than $130 from the $95 Ukraine currently pays. But opposition politicians warned Wednesday that the deal could be used to exert more pressure on Kiev to move back into Moscow's fold.

Tension had been growing after Central Asian suppliers said they wanted significant price increases next year. Europe has been on tenterhooks since Russia cut off supplies to Ukraine in January, demanding a price hike to $230. The standoff was resolved when Swiss-registered trader RosUkrEnergo stepped in to lower the overall price by adding cheaper Central Asian gas to Ukraine's supplies.

A RosUkrEnergo spokesman confirmed Wednesday that the new price had been set. Under the deal, the trader will sell 55 billion cubic meters of gas from Central Asia, a volume that is expected to meet all Ukraine's domestic gas needs.

But Ukrainian opposition politicians slammed the new agreement as strengthening the role of RosUkrEnergo, which has faced criticism over its murky ownership structure, and as being potentially devastating for the economy.

Hryhoriy Nemyria, a senior adviser to Ukrainian opposition leader Yulia Tymoshenko, said the economy could not handle the new price. "The attempts by Yanukovych's government to present this deal as a success is an attempt to put on a good face on a bad show," Nemyria said by telephone from Kiev. "This is more than the maximum Ukraine's industry can deal with."

He said the price hikes threatened to exacerbate further the mushrooming debts of state-owned Ukrainian oil and gas monopoly Naftogaz to RosUkrEnergo even further, and warned that the Ukrainian government could be forced to make concessions, such as handing over a stake in its strategically important gas-pipeline network, to Russia as a result. RosUkrEnergo, which has been investigated for links to organized crime, is half-owned by Gazprom and half-owned -- on paper at least -- by a Ukrainian gas trader Dmitry Firtash and his partner Ivan Fursin.

RosUkrEnergo spokesman Andrei Knutov said Naftogaz's current debts stood at $322 million. Naftogaz spokesman Konstantin Borodin refused to confirm the figure.

Nemyria said the Kremlin was already calling for too many concessions, noting Fradkov's call Tuesday for Ukraine to "synchronize" its entry into the World Trade Organization with Russia's. Since Yanukovych swept back into government earlier this year, the original architects of RosUkrEnengo have moved back into positions of power and Ukraine seems to be drifting toward Moscow's sphere of influence, even though Yushchenko has tried to maintain a pro-Western line. Yuriy Boiko, who was head of Naftogaz at the time RosUkrEnergo was founded in 2004, was made energy minister in Yanukovych's government.

Knutov said accusations of RosUkrEnergo's organized crime ties were groundless and that RosUkrEnergo's work on the market so far proved it met all its contractual obligations.

He insisted RosUkrEnergo would be making minimal profits on the operation. He acknowledged, however, that the trader had yet to reach final agreement with the leaders of the Central Asian states -- Turkmenistan and Uzbekistan -- on the purchase price.

Gazprom spokesman Sergei Kupriyanov said it was not clear what the final average price would be for Ukraine once gas supplies from Russia, priced at $230 per thousand cubic meters, were included in the equation.