NEW PRIME MINISTER RETURNS EMPTY-HANDED FROM MOSCOW
ANALYSIS AND COMMENTARY: By Vladimir Socor
Eurasia Daily Monitor, Volume 2, Issue 185
The Jamestown Foundation, Washington, D.C.
Wednesday, October 5, 2005
Yuriy Yekhanurov paid his first visit abroad as Ukrainian prime minister to
Moscow on September 30, barely eight days after his confirmation by
parliament and only two days after the appointment of most of his
ministerial team.
The alacrity of the visit reflected -- as had President Viktor Yushchenko's
choice of Yekhanurov in the first place -- the president's ongoing
rapprochement with groups from the former regime and his decision to bid
for Moscow's support to a Ukrainian presidency in crisis.
Yushchenko and his new government urgently seek two major favors from the
Kremlin: First, guaranteed gas deliveries on the traditional barter scheme
this coming winter, which coincides with the parliamentary election campaign
in Ukraine; and, second, a visit by Russian President Vladimir Putin with
Yushchenko in Ukraine before the official start of the electoral campaign.
On both counts, Yekhanurov returned empty-handed.
The gas supply situation can crucially affect the parliamentary election's
outcome. Pro-presidential parties are especially vulnerable to this factor:
gas shortages could cost these parties heavily in terms of votes lost, while
normal supplies would hardly earn them any additional votes.
By the same token, the major opposition parties (despite and above their
current differences) stand to gain politically from any gas shortages. Thus,
Gazprom could potentially sway Ukraine's parliamentary elections either way,
depending on Kremlin political decisions.
At least since June, the Ukrainian government (under Yulia Tymoshenko as
prime minister until September 8) had insistently sought to negotiate and
sign the agreement with Gazprom for 2006 on the same non-market terms as
in the previous annual agreements.
Under these arrangements, Gazprom does not sell gas to Ukraine, but pays
Ukraine in gas -- some 25 billion cubic meters annually -- in lieu of cash
for pumping Russian gas to Europe through Ukraine's transit pipelines. In
this gas-for-service barter deal, both the Russian gas and Ukraine's transit
services are valued far below European market rates.
Given the international price dynamics for energy, Gazprom is missing out on
a windfall of profits by delivering that amount of gas to Ukraine on
price-controlled and barter terms, instead of selling that gas for cash at
European market rates to Ukraine or elsewhere in Europe. Thus, Gazprom
wants to switch its arrangements with Ukraine to commercial terms as early
as January 1, 2006.
It proposes to pay for Ukrainian transit services in cash and sell Russian
gas to Ukraine at European market prices. Ukraine, unable to afford those
prices, is asking Moscow to postpone any changes until 2007 and to move only
gradually afterward toward market-based arrangements.
Yekhanurov and the accompanying team of ministers were eager and anxious
for a start to discussions on gas deliveries, transit, and payments during
their Moscow visit. Putin, however, seemed to circumvent the gas issue
altogether when receiving the Ukrainian delegation at his Novo-Ogarevo
residence.
Russian Prime Minister Mikhail Fradkov prevented any meaningful discussion
on gas in the intergovernmental meeting by informing the startled Ukrainians
that the relevant Russian ministers -- Viktor Khristenko, German Gref, and
Alexei Kudrin -- could not attend because they were otherwise engaged.
The excuse seemed particularly lame considering that this was the first
visit by a Ukrainian prime minister to Russia since the December 2004
regime change in Ukraine, as well as a major fence-mending visit from Kyiv's
perspective.
At the concluding briefing, Fradkov announced that the gas issue is being
referred back to ministers for discussion, as "there will be enough time for
exchanging views on this … Naturally, these complex issues require more
thorough discussions." (Russian Television Channel One, UNIAN, Inter TV,
September 30).
Apparently, the Russian side intends to drag out the talks into the cold
season, and as close to January 1 as possible, in order to raise the anxiety
level in Kyiv. At the same time, Moscow seeks to inject the issue of joint
ownership of Ukraine's transit pipelines into the discussions on Russian
annual gas supplies to Ukraine. By raising the prospect of cuts in supplies,
Moscow aims to pressure Kyiv into turning Ukraine's gas transit system into
a Ukrainian-Russian consortium.
Further complicating Kyiv's situation, Turkmenistan -- the leading gas
supplier to Ukraine -- demands reimbursement of Ukrainian debts worth $500
million in barter goods, before negotiating the gas supply agreement for
2006. Turkmen President Saparmurat Niyazov has for that reason postponed
a scheduled visit to Kyiv.
The possibility of a Putin visit to Ukraine was not publicly mentioned
during Yekhanurov's Moscow visit, although it must have been part of his
mandate. Yushchenko has publicly as well as privately invited Putin to visit
Ukraine with growing insistence since August, against the backdrop of a
deteriorating political and economic situation in the country and with an
eye to the twin problems of fuel supply and the parliamentary election
campaign this coming winter.
In recent weeks, Yushchenko has publicly invited Putin variously to join the
Ukrainian, Georgian, and Lithuanian presidents for the 80th anniversary of
the Soviet pioneers' camp in Artek, Crimea (an embarrassing rationale that
the other presidents had the common sense of rephrasing as a visit with
Artek children); or to attend a vaguely defined summit in Yalta of the
Community of Democratic Choice (thus altering the CdC's agenda and its
brand); or a summit of Black Sea countries' presidents (instead of the
"Yalta-2" summit proposed by Georgian President Mikheil Saakashvili to
mark the demise of the 1945 Yalta system); or finally a bilateral visit with
Yushchenko in Ukraine.
Yushchenko is evidently weakening his own position by casting himself as a
persistent petitioner. For his part, Putin is playing hard to get by
ignoring almost demonstratively the Ukrainian president's entreaties.
Once Ukraine's electoral campaign begins officially (it is already underway
unofficially), Yushchenko's entreaties to Putin will inevitably provoke
comparisons with former President Leonid Kuchma's orchestration of
supportive visits by Putin during Ukraine's 2004 campaign season.
However, Moscow has yet to decide who and in what forms to support in
Ukraine in the upcoming elections and beyond, and at what price.