MOSCOW. (RIA Novosti economic commentator Nina Kulikova.) The talks on rising prices of Russian gas, for which Ukraine currently pays at a privileged rate, are taking too long.
At present, Gazprom has a barter arrangement with Ukraine, supplying it with discount price gas ($50 per 1,000 cubic meters) in return for transit.
Fifty dollars is not enough when European prices have soared to $200, said Alexander Ryazanov, deputy chairman of Gazprom's board. This price does not cover spending on gas production and transportation and should be raised to $160. However, Ukraine is not ready to give up barter for money settlements, saying that the issue calls for additional study. In other words, they want the privileged price.
But gas deliveries are not the only stumbling block in Russia-Ukraine relations, which are darkened by similar problems in other spheres of economic cooperation.
The Russian Agency for Nuclear Energy (Rosatom) plans to call for leveling off prices of uranium fuel delivered by the Russian TVEL company to the nuclear power plants in many countries, including Ukraine. TVEL buys uranium in Ukraine at world prices but provides thermal columns for its nuclear plants at a privileged price, resulting in a loss of $150 million a year.
Rosatom suggests that prices of Ukrainian raw material and Russian fuel should be leveled off in 2007. This can have negative consequences for Ukraine, because TVEL is currently supplying nearly 100% of fuel requirements of Ukrainian nuclear power plants.
In 2006, the Russian Federal Tariff Service may cancel the exclusive tariff for the delivery of iron ore from Ukraine by rail to Russian steel works, including to the Magnitogorsk Iron & Steel Works (MMK) and Mechel. The current tariff, which is nearly the same as the domestic price in Russia, ensures a substantial discount for the Ukrainian providers.
It is no coincidence that all of the above prices and tariffs are to be raised simultaneously, said Irina Rozhkova, an expert of the Eurasia Heritage Foundation. In the long term, conversion to world standards will benefit both Russia and Ukraine by making their relations more transparent and bringing them closer to market standards, she said. But the current political confrontation between Kiev and Moscow is not benefiting their economies.
These contradictions show again how closely the two economies are connected. The industries of Russia and Ukraine were created as parts of a single production cycle that supplied the same market. It is apparent that Ukrainian nuclear power plants cannot work normally without the Russian TVEL, and Russian steel plants badly need Ukrainian ore. But the intention of the Ukrainian government to integrate into Euro-Atlantic structures has resulted in an artificial division of what used to be a single whole.
Kiev wants to join NATO and the European Union, which is forcing Moscow to revise its position. In addition, a few days ago Kiev hosted a forum of the Community of Democratic Choice, which was attended by delegates from Georgia, Azerbaijan, the Baltic countries, Poland and other post-socialist states that want to become independent of Russia and the Commonwealth of Independent States. This has not added warmth to Russo-Ukrainian relations.
Moscow and Kiev are bargaining, but Russia has more arguments on the table, said Leonid Vardomsky, head of the center of the CIS and Baltic states at the Institute for International Economic and Political Studies (Russian Academy of Sciences). Kiev may agree to concessions because Russia has adopted a tough stand. In addition, the parliamentary election is scheduled in Ukraine in March 2006 and nobody would leave the potential electorate without heating and gas. At the same time, Vardomsky said Ukraine's concessions would be minor and Kiev would not budge from its position of principle.
In this situation, the only thing Moscow can do is fully convert its relations with Ukraine to market standards. The new Russian initiatives demonstrate its harsh stand and mean that Russia is learning to formulate a consistent policy regarding its former political allies. Subsidizing them is not consistent with the concept of an effective market policy.
