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Russia Agrees to Steep Price Increase for Turkmen Gas - ASHARQ AL-AWSAT English Archive
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ASHGABAT (AFP) – Russian state gas monopoly Gazprom has said it had agreed to a 54-percent increase in the price it pays for Turkmen gas, a deal which could give Russia new leverage in its demands for higher gas prices from Ukraine.

The Russian group is to pay, with immediate effect, 100 dollars (78 euros) per 1,000 cubic meters of gas from Turkmenistan to the end of 2009 instead of 65 dollars per 1,000 cubic meters (35,000 cubic feet) previously.

The price of Turkmen gas is a key component of a supply agreement between Russia and Ukraine that was struck in January, temporarily resolving a price dispute between the countries that led Russia to cut its supplies to Ukraine — with a knock-on drop in supplies to western Europe.

As part of that settlement between Moscow and Kiev, Ukraine agreed to pay 95 dollars per 1,000 cubic meters of gas from a Gazprom intermediary company that combined Russian gas costing 230 dollars per 1,000 cubic meters with far cheaper gas from Turkmenistan.

With the price of Turkmen gas to Russia going up, “it’s obvious that the price to Ukraine is going to go up,” said Chris Weafer, an analyst at Alfa Bank.

“It’s an important deal for Gazprom, because it now gives them complete leverage over Ukraine in price negotiations” for 2007 and beyond, he said.

The chief executive of Gazprom, Alexei Miller, refused to comment on how the new deal might affect the future price of gas to Ukraine.

“That is a subject for separate talks,” the Gazprom CEO said.

Ukraine’s energy minister was due to give a briefing later Tuesday.

Miller said that the total volume of gas supplies from Turkmenistan until the end of 2006 would be 42 billion cubic meters (bcm). For the following three years, it would be 50 bcm per year, he said.

Miller explained that of the 42 bcm Turkmenistan will supply to Russia until the end of 2006, Russia will buy 30 bcm at the current price of 65 dollars, and the rest at 100 dollars per bcm.

All the Turkmen gas from 2007-2009 will cost 100 dollars per bcm, Miller said.

Turkmenistan and Russia had been locked in a price dispute of their own this year, with earlier talks between Miller and Turkmen President Saparmurat Niyazov breaking down at the end of June.

“Turkmenistan was very unhappy with the deal done between Gazprom and Ukraine in January,” said Alfa Bank’s Weafer.

“They felt their gas was being exploited to make the price to Ukraine acceptable, and they indicated they were willing to break their contracts with Russia and demand a higher price,” he said.

Niyazov said on Tuesday that talks with Gazprom would continue to determine a long-term gas price for supplies from 2009 forward.

Gazprom controls the world’s largest reserves of natural gas but has been using relatively inexpensive gas from Turkmenistan to boost production volumes and make up for delays in the development of new fields.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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