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Moscow Times
January 16, 2009
Kremlin Sets Stage for a Gas Summit
By Nadia Popova / Staff Writer

President Dmitry Medvedev will host an international summit to discuss the stability of gas supplies to Europe in Moscow on Saturday and the Foreign Ministry is sending out the invitations already, the Kremlin said Thursday.

The EU's energy commissioner and the Czech industry and trade minister agreed to attend as observers if Ukraine took part. But Ukraine, as well as France, said they would not come.

Ukrainian Prime Minister Yulia Tymoshenko, however, will be in Moscow for one-on-one talks with Prime Minister Vladimir Putin on Saturday, raising the possibility that she would attend the summit.

The choice of Moscow as a summit venue has been staunchly opposed by Ukraine and some eastern European countries. Gazprom suspended shipments Jan. 7 after negotiations over transit fees and gas prices with Ukraine, the transit country for 80 percent of the company's exports to the European Union, ended in deadlock.

Putin is likely to face criticism over the cutoff Friday during a visit to Berlin, where he will discuss the dispute with German Chancellor Angela Merkel during a previously scheduled trip for International Green Week.

Merkel said Thursday that Russia was risking its reputation as a reliable energy supplier because of the halt of its gas exports to Europe.

"I think there is a risk that confidence in Russia could be lost in the long run," Merkel said at a news conference in Berlin, news agencies reported.

Thursday was the ninth day for 18 European countries to suffer dramatic fuel shortages, which coincided with an unusually cold winter.

Merkel promised to raise the gas dispute with Putin.

The two leaders will also discuss bilateral relations, a Russian government spokesman said.

Another topic on their agenda will probably be Nord Stream, a pipeline that is to directly ship Russian gas to Germany via the Baltic Sea when it opens in 2011, said Eugen Weinberg, a senior commodities analyst at Commerzbank.

German Economy Minister Michael Glos said earlier this month that the spat between Russia and Ukraine showed that Europe needed Nord Stream. Merkel's remarks on Thursday, however, suggested that she might be less optimistic about the pipeline, Weinberg said.

"If Russia's reputation as a reliable gas provider deteriorates in the current spat with Ukraine, Europeans may decide to diversify away from Russia and look for alternative providers and alternatives routes like Nabucco," he said.

Construction is expected to start this year on Nabucco, a pipeline that would skirt Russia to pump Central Asian gas to Europe. It is to open in 2012.

Weinberg said Merkel might point out to Putin that EU countries do not have gas contracts with Ukraine but they do have long-term supply agreements with Russia, so supplies must be restored no matter what the cost.

Back in Moscow on Saturday, Putin will meet with Tymoshenko, but his press office said it was unclear whether he will attend the gas summit with Medvedev.

Medvedev personally invited Ukrainian President Viktor Yushchenko and Moldovan President Vladimir Voronin to the summit by telephone Thursday, the Kremlin said on its web site.

Following Thursday's conversation with Medvedev, Yushchenko sent Tymoshenko a letter telling her "to immediately present guarantees on the smooth transit of gas to both the European and Russian sides on the condition that Russia resumes gas supplies in the volume of 320 million cubic meters a day, 8 percent of which would be used for the technical reasons."

Medvedev suggested to Yushchenko that a consortium of European gas producers buy the so-called "technical gas" for Ukraine. This gas is used to power transit stations in Ukraine.

Yushchenko said earlier that he would not come to Moscow and called for the summit to be held in Brussels or Prague.

The French Foreign and European Affairs ministries said Thursday that there was no reason to hold the summit until gas supplies were resumed, Interfax reported.

The European Commission, however, confirmed that the EU Energy Commissioner Andris Piebalgs and Czech Industry and Trade Minister Martin Riman will attend the summit Saturday, said a source with knowledge of the situation.

Ukraine will not restart gas transit to Europe unless an agreement is signed with Russia on who would cover the cost of the technical gas, the country's presidential energy envoy Bohdan Sokolovsky said, Interfax reported.

A major hurdle for the resumption of gas supplies to Europe is a disagreement between Kiev and Moscow over where the gas should enter Ukraine.

Sokolovsky said Ukraine had provided two drafts of an agreement to the Russian side.

Ukraine and Russia are also feuding over the price of gas supplies to Ukraine.

Sokolovsky said a reasonable gas price for Ukraine in the first quarter of 2009 would be between $192.6 per 1,000 cubic meters with a transit rate of $2.2 per 1,000 cubic meters per 100 kilometers and $218 with a transit rate of $2.47.

Gazprom asked for $250 per 1,000 cubic meters in late December. However, starting in January, it demanded a "market price" of $450 per 1,000 cubic meters in the first quarter of this year, a level it said would provide the same earnings as EU sales.

Gazprom also says its transit contract with Ukraine sets the rate at $1.6 and cannot be changed until 2013.

Anatoly Medetsky contributed to this report.