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. Last Updated: 07/27/2016

Gazprom May Sell Gas Direct to Kiev

bloombergWorkers checking a gas pumping station in Ukraine. Gazprom may start selling gas directly to Ukraine next year.
A top Ukrainian official on Tuesday welcomed statements by Gazprom board chairman Dmitry Medvedev hinting that Gazprom may sell gas directly to the country next year and cut out murky gas trader RosUkrEnergo.

Medvedev, a first deputy prime minister considered to be a possible candidate to replace Vladimir Putin as president next year, told Germany's ARD television Monday that the current setup might be outdated.

"We will probably revise the scheme of our relations and give up any intermediary structures that are not clearly understandable -- at least those structures whose existence is not quite clear to us and who were proposed by our partners in a certain historical context," Medvedev said, Interfax reported.

Ukrainian Finance Minister Nikolai Azarov, also the country's first deputy prime minister, welcomed Medvedev's statements on Tuesday.

"We're closely studying it. We are always in favor of having direct links between our suppliers," Azarov said, Russian news agencies reported.

RosUkrEnergo, a Switzerland-registered joint venture between Gazprom and Ukrainian businessman Dmytro Firtash, handles the gas trade between Gazprom and state-owned Naftogaz Ukrainy. The gas, currently priced at $130 per thousand cubic meters, mixes more expensive Russian gas with gas from Turkmenistan, which is priced lower.

RosUkrEnergo landed the lucrative contract in a controversial deal that ended a pricing dispute between Gazprom and Ukraine in January 2006.

That dispute, which saw supplies drop to Ukraine and several European countries in the middle of a harsh winter, first raised European worries about Moscow's ability to act as a reliable energy supplier. Most of Russia's gas supplies to Europe pass through Ukraine.

In his interview with the German television station, Medvedev said cutting out middlemen could "simplify our relations and help [the Ukrainians] make payments on time and not accumulate such big debts."

Gazprom threatened to reduce supplies to Ukraine in the midst of a tense election count earlier this month, until Kiev assured the gas giant that it would pay its $1.2 billion debt by Nov. 1.

Russia and Ukraine have yet to agree on a gas price for 2008, but the current price tag of $130 per thousand cubic meters is expected to rise.

Yulia Tymoshenko, widely believed to become Ukraine's prime minister soon, said Tuesday that she and her government would do everything in their power to that ensure no intermediaries were involved in gas trading once they came to power. Her bloc has long sought direct gas sales from Gazprom.

"I am convinced gas prices will be balanced and moderate. We will find an understanding with Russia on gas deliveries next year," Tymoshenko said Tuesday, Interfax reported.