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Gazprom to charge all ex-Soviet republics market prices by 2008

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Russia's state-run gas monopoly Gazprom [RTS: GAZP] said it expects to charge market gas prices for all former Soviet republics by 2008.
MOSCOW, December 8 (RIA Novosti) - Russia's state-run gas monopoly Gazprom [RTS: GAZP] said it expects to charge market gas prices for all former Soviet republics by 2008.

Some republics have been paying subsidized prices for Russian natural gas in the transitional post-Soviet period, with Belarus enjoying the lowest price of $46.68 per 1,000 cubic meters, compared to over $250 on average in western Europe.

"We expect to complete the process by 2008," Dmitry Medvedev, chairman of Gazprom's board of directors and first deputy prime minister, said.

Medvedev said each country would be subject to a specific price formula, which took into consideration long-term contracts and other factors but added that the process of transferring to the new price structure was difficult, which is why Gazprom avoided any sudden shifts.

"We have not pushed any country in the post-Soviet space to pay the same prices as west European consumers," he said, noting that prices could change and even fall, depending on world markets, and that the transition to new prices would encourage post-Soviet economies to be more competitive.

Gazprom's new price formula for the former Soviet Union led to a row with neighboring Ukraine in January, which resulted in the suspension of gas deliveries to the former Soviet republic and shortfalls to Europe. But a deal was soon clinched and deliveries resumed.

Medvedev said the Russian gas giant would only supply gas to Ukraine from Turkmenistan in 2007. This year Ukraine imports a mixture of Russian and cheaper Turkmen gas for a combined price of $95 per 1,000 cubic meters.

He said the price for Ukraine in 2007 would be $130 per 1,000 cubic meters, as the sides had agreed earlier. "We are talking about a coordinated volume of deliveries worth 55 billion rubles ($2 billion)," he said.

Russia's first deputy premier also said that Gazprom's relations with post-Soviet countries would hopefully develop in a positive way.

Russia's relations with former Soviet republics have been complicated following the demise of the Soviet Union, with some republics seeking integration with Europe and membership in NATO.

"We have a common history, we used to have a common gas transit network and common interests," he said, adding that the complicated transitional period to market price mechanisms would soon be over and the market would eventually stabilize.

Medvedev said Gazprom's oil subsidiary, Gazprom Neft [RTS: SIBN], would start raising oil production 4% annually, or 80 million metric tons per year (1.6 million bbl/d), by 2020.

In 2006, Gazprom Neft is expected to produce 46 million tons (338 million bbl), he said, adding that the company's production plans were realistic and that Gazprom Neft's investment program would be financed from corporate revenues.

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