Russia plans to raise cost of gas sold to Ukraine

Russia has agreed to pay nearly triple the amount it currently does for Kazakh natural gas and plans to partly offset the hike by raising the cost of gas it sells to Ukraine, a Russian business newspaper reported Monday. Kommersant cited unnamed sources close to the negotiations as saying that Moscow agreed to pay US$140 (110) per 1,000 cubic meters of Kazakh gas compared to the US$50 (39) price it paid previously.

A spokesman for Russian state-controlled natural gas monopoly OAO Gazprom declined to comment immediately on the Kazakh deal. The deal comes as competition for the energy resources of oil- and gas-rich Central Asia is intensifying. U.S. Vice President Dick Cheney paid a high-profile visit to Kazakhstan earlier this month to lobby for American energy interests. EU Energy Commissioner Andris Piebalgs also traveled to the Kazakh capital Astana to discuss the possibility of a European-bound gas pipeline that could skirt Russia.

Russia imports about 8 billion cubic meters of natural gas per year from Kazakhstan and Kommersant calculated that the increase would cost Gazprom an additional US$700 million ( Ђ 548 million) annually. In exchange for shouldering a more market-oriented price, Russia would expand its presence in the Kazakh gas industry, the paper reported.

Kazakhstan previously announced plans to raise capacity by 40 billion cubic meters per year and plans on forming two joint ventures with Russia to tap the Imashevsk field and the Tsentralny field under the Caspian Sea, which hold an estimated 129 billion and 2 trillion cubic meters of gas respectively. Apparently referring to steps that would partly offset the price hike, Kommersant quoted Gazprom's deputy management board chairman Alexander Ryazanov as saying that Ukrainian consumers would pay a higher price as July 1 US$130 ( 102) per 1,000 cubic meters.

Russia and Ukraine faced off in a bitter spat over natural gas prices over the New Year holiday a dispute that resulted in gas supplies temporarily being shut off to Ukraine. The two sides ultimately reached deal under which Ukraine would buy wholesale gas from Russia and Central Asia at a blended price of US$95 (74) per 1,000 cubic meters from a gas trading company 50 percent owned by Gazprom.

The disruption, which also affected several European countries, led to calls for the EU to diversify its energy sources. Yaroslav Dykovytsky, a finance director with Ukraine's state-owned Naftogaz gas and oil company, said he knew nothing of plans for increased prices. "I don't know what kind of statements from the Russian side there are. We have a five year deal under which Ukraine pays US$95 per 1,000 cubic meters," he said. "I see no ground for the price to be reviewed", reports the AP.