During the talks between Prime Ministers Vladimir Putin and Yulia Tymoshenko, the sides agreed to resume the transit of Russian natural gas to Europe via Ukraine, approved the European pricing formula for gas deliveries to Ukraine, and decided to abandon gas trade intermediaries.
As a result, the Gazprom and Naftogaz CEOs signed supply and transit contracts for 2009-2019 on January 19.
In 1990-2007, Ukraine received Russian natural gas at the so-called Ashgabat formula based on the price of the cheap gas Gazprom bought in Central Asia, because Ukraine transited up to 80% of Russian gas exports to Europe.
Last year, Ukraine bought Russian natural gas at $179.5 per 1,000 cubic meters, although the price for Europe exceeded $400 by the end of 2008.
However, in the summer of 2008, when oil prices reached their peak and the demand for hydrocarbons soared, it became clear that Kazakhstan, Uzbekistan and Turkmenistan would adjust their gas prices to European market prices. Putin recently said that the Russian gas monopoly would pay $340 per 1,000 cubic meters of Central Asian gas on average in the first quarter of 2009.
Initially, Russia and Ukraine considered Ukraine's gradual transition to the European gas pricing formula by 2011, but the gas crisis has sped up the transition. As of now, Ukraine has agreed to buy Russian gas at the European price with a 20% discount in 2009.
The gas price for Ukraine will be $360 in the first quarter of 2009, or 80% of the earlier claimed European price for Ukraine of $450. Later the price for Ukraine will change every three months depending on the average European price, which is likely to fall because it depends on oil prices six months previous.
Some analysts say the average European gas price will fall to $250 in the second quarter and to $175-$180 in July-December 2009.
Gazprom's budget is based on an average annual European price of $280 per 1,000 cubic meters of gas, which puts the price for Ukraine at $224. This is probably why Tymoshenko said after the Monday talks that Ukraine would pay less than $250 for Russian gas in 2009, adding that this would save her country $5 billion.
Russia and Ukraine also decided to make mutual gas trade more transparent and to stop using the services of gas trader RosUkrEnergo, a parity venture between Gazprom and two Ukrainian businessmen.
Russia will also save on gas transit to Europe via Ukraine in 2009. The new 10- year transit contract stipulates a preference tariff of $1.70 per 1,000 cubic meters per 100 kilometers for 2009. This will save the Russian gas monopoly up to $2 billion this year because the average European tariff is approximately $3.
But from January 2010 Ukraine will pay European prices for Russian natural gas, and Russia will pay a European tariff for gas transit via Ukraine.
The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
