Ukraine coalition deal could spell EU gas trouble
ANDREW RETTMAN
22.06.2006 @ 15:15 CET
EUOBSERVER / BRUSSELS - Ukraine's Orange Revolution allies signed a new government coalition deal on Thursday (22 June), set to put hawkish former prime minister Yulia Tymoshenko back in power but raising the risk of a fresh gas crisis that could impact the EU.
The Ukrainian parliament is likely on 27 June to approve the Tymoshenko appointment while installing steel magnate and key ally of president Viktor Yushchenko - Petro Poroshenko - as parliamentary speaker, but leaving pro-Russian politician Viktor Yanukovych in opposition.
Tymoshenko: her come back as prime minister could alienate pro-Russian groups in Ukraine (Photo: tymoshenko.com)
A European Commission spokeswoman "welcomed" the deal - three months after elections saw Mr Yanukovych scoop the most votes - with Brussels "hoping Ukraine will continue economic and political reforms" in line with a draft EU action plan for a future free trade zone agreement.
But the deal does not bode well for Ukraine-Russia relations at a time when Kiev and Moscow are negotiating Gazprom's demand that Ukraine pays $130 per one thousand cubic metres of gas from 1 July instead of $95, in echoes of the 1 January gas crisis that hit EU member states as far west as Germany and France.
Russia supplies 25 percent of the EU's gas consumption, 80 percent of which continues to flow through Ukraine despite Gazprom projects to build new northern and southern pipelines with Germany and Hungary in 2010 or 2011, bypassing the EU transit state.
Minutes after the coalition-signing ceremony, Ms Tymoshenko told press that "all issues on gas supplies to Ukraine now require further deep revision and review" nine months after losing her old job amid criticism of president Yushchenko's handling of Russian gas talks.
Recent constitutional reforms in Ukraine give the prime minister more power than the president, with Ms Tymoshenko earning herself a prickly reputation in both Moscow and Brussels over her 2005 plans to renationalise key industrial assets, including steel mills.
Russia reacts
The noises coming from Russia already point to worsening relations, with members of the Russian parliament calling the new coalition "anti-Russian" on 21 June and with populist right-winger Vladimir Zhirinovsky predicting the break-up of Ukraine as a state.
Turkmenistan's bid to double its gas price for Russia from around $50 per 1,000 cubic metres to $100 could also impact the situation, with Turkmen gas playing a key role in the current price structure of Russian exports to Ukraine.
Under the current deal, the Swiss-based, joint Russian-Ukrainian firm Rosukrenrgo buys Russian gas at $230 and buys Central Asian gas transited through Russia at the much lower price of around $50, with the price difference enabling it to sell supplies to Ukraine at $95.
According to The Moscow Times, Turkmenistan said that it may turn off the gas taps if Gazprom does not agree to the hikes, with independent energy expert Olexander Chaliy telling the paper that "An energy crisis could develop within the country [Ukraine] and internationally in the next six months to one year."
The 1 January gas crisis was a wake up call for the EU, which soon after pledged to build a new energy policy with heavy stress on diversification away from Russia and current transit routes.
Brussels plays wait and see
European Commission energy experts take solace in the fact that the existing Rosukrenrgo agreement says prices will stay stable until the end of 2006 if Russia and Ukraine cannot agree on new prices post 1 July.
Russia has also given assurances at the highest political level the 1 January scenario will not happen again. "We're following the situation closely but not with alarm or concern," the commission's energy spokesman Fernando Espuny told EUobserver.
Back in late 2005 however, the original gas crisis arose when Russia violated agreements to keep selling gas to Ukraine at stable prices while accusing Kiev of stealing EU-bound supplies.
The threat of rising consumer gas prices has also sparked unrest in Ukraine itself.
Consumer prices for natural gas and electricity went up by 25 percent in May and are set to double after 1 July, with Ria Novosti reporting that over 200,000 people have taken to the streets in major towns in the past few days to protest the move.
