RUSSIAN, UKRAINIAN PMs SIGN AGREEMENT ON OIL AND GAS

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SOCHI, August 18 (RIA Novosti) - Russian and Ukrainian prime ministers Mikhail Fradkov and Viktor Yanukovich have signed an intergovernmental agreement "On Measures to Provide Strategic Partnership in the Gas Sector." The signing ceremony was attended by the two countries' presidents, Vladimir Putin and Leonid Kuchma.

According to the document, the project of construction and subsequent exploitation of the Bogorodchany-Uzhgorod gas pipeline is the joint investment project within the framework of strategic co-operation and formation of an international consortium to manage Ukraine's gas and transport system.

The document notes that the Russian side guarantees additional natural gas transit through the gas pipeline to the volume of five billion cubic metres in 2005 and up to 19 billion cubic metres in 2010. Moreover, the agreement envisages that the Ukrainian side should provide the necessary conditions for unobstructed construction and exploitation of the gas pipeline.

According to the document, "the consortium's profits from the use of the gas pipeline are free from the income tax for the pipeline's payback period."

The document provides for other tax and dues benefits.

For the payback period, the Ukrainian side has also established a zero rate of rental payments for the transit of natural gas across Ukrainian territory through this pipeline.

The document in particular points out that the new legislative and regulatory acts of Russia and Ukraine causing an increase in any tax rates, dues, customs duties and other payment of the kind, are not effective in relation to the abovementioned organisations in the construction, commissioning and payback periods.

The agreement will remain effective till December 31, 2030, and it will be automatically extended for the subsequent five-year periods.

The Russian and Ukrainian prime ministers also signed an intergovernmental agreement on oil transit in Ukraine.

According to the document, the Ukrainian side will provide oil transit across Ukraine through the main pipelines with due account for their flow capacities.

When forming the schedule of oil transportation outside Russia, the Russian side will consider Ukraine's pipeline flow capacities declared by the Ukrainian side. If the oil that needs to be transported exceeds the capacities in hand, the sides will coordinate conditions for creating additional capacities.

According to the document, the sides will cooperate in developing and carrying out promising oil shipment project through new transit directions. Hence, authorised Russian and Ukrainian organisations will provide optimal operation of the Odessa-Brody pipeline, including Russian oil deliveries to Brody-Odessa-Pivdenny, a sea terminal.

The document specifies tariffs, property rights to oil, preservation of the Russian oil amount and quality.

The agreement has been concluded for 15 years, and will be automatically extended in the next five years, if the sides do not decide otherwise.

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