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Ukraine Sees No Gas War Looming With Russia, Azarov Says

Ukraine doesn't expect a "gas war" as the transit country seeks to revise its long-term contract for Russian fuel imports, Prime Minister Mykola Azarov said.

"There is not going to be any kind of war, including a gas war, with our strategic partner Russia," Azarov said in an interview broadcast by Inter TV Channel late yesterday.

Ukraine has asked Russia to revise a 10-year gas supply deal, signed in 2009, to help balance the budget and persuade the International Monetary Fund to release the remainder of a $15.6 billion loan program. Gas pricing disputes with Ukraine have led OAO Gazprom, Russia's gas export monopoly, to cut supplies at the start of the year twice since 2006, disrupting deliveries to the European Union during freezing weather.

"We will stick to our contracts until we reach an agreement," Azarov said.

NAK Naftogaz Ukrainy, the Kiev-based state energy company, is aiming to reduce the cost of imported gas instead of raising prices at home as it seeks to close a deficit. Ukraine has received $3.4 billion of the IMF loan in two parts, while the third tranche has been delayed since March.

Gazprom, Naftogaz Merger

Ukraine is obliged to buy no less than 33 billion cubic meters of natural gas a year under the supply contract, Gazprom Chief Executive Officer Alexei Miller said on Aug. 31. The Russian export monopoly links contract prices to oil and products with a time lag.

Gazprom may revise contracts only if Ukraine agrees to a merger with Naftogaz, Miller said last week. Ukraine must resolve the import price before considering a merger or integration of Naftogaz and Gazprom, President Viktor Yanukovych said Sept. 3.

Naftogaz has said it is paying $355 per 1,000 cubic meters of gas this quarter. In May, Yanukovych said Ukraine was seeking a price of $240.

Ukraine's government has sent a proposal to Russian Prime Minister Vladimir Putin calling for a return to government-level gas agreements from 2004, according to a statement on its website last week. The 2009 supply contract was signed between the two state companies and contradicts the earlier agreements, Azarov said.

The eastern European country may have to turn to an international court "as a last resort" in order to revise gas supply contracts, Yanukovych said on Sept. 3, according to his website.

"Ukraine is losing lots of money," Yanukovych said. "We are sure that we are suffering extra losses now. We cannot afford not taking active steps to solve this issue somehow."


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