Ukraine leader to seek Turkmen gas to ease reliance on Russia

Fri Feb 8, 2013 9:30am EST

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KIEV Feb 8 (Reuters) - The supply of Turkmen gas to Ukraine will be on the agenda during a visit to Turkmenistan next week by Ukraine's president, whose government is struggling to reduce its dependence on expensive Russian gas.

President Viktor Yanukovich's visit will take place on Feb. 12-14, his office said on Friday. Ukrainian Foreign Minister Leonid Kozhara, who travelled to Turkmenistan last month to prepare the visit, has said gas will be discussed.

Turkmenistan used to sell gas to Ukraine in the late 1990s and early 2000s, shipping it through Russian pipelines. But since 2009, Ukraine has been buying the fuel only from Russia's Gazprom.

The price of Russian supplies has been rising steadily, becoming a burden on the state budget and the economy, because a 2009 contract between Gazprom and Ukraine's Naftogaz linked it to global energy prices.

Finding another supplier could be a quick solution for Ukraine, but only if Kiev and Ashgabat agree on a price and Moscow allows such shipments.

Ukrainian officials say that a new free trade agreement signed last year by the Commonwealth of Independent States, a club of ex-Soviet republics, obliges Russia to allow shipments of Turkmen gas to Ukraine at competitive rates.

But Moscow has yet to comment officially on the idea.

According to oil and gas firm BP, Turkmenistan's natural gas reserves are equal to those of Saudi Arabia and are smaller only than those of Russia, Iran and Qatar.

But the landlocked nation must transport gas to Europe through Russia, although it has two other export pipelines going to China and Iran.

So far, Ukraine has failed in its attempts to renegotiate the Russian deal. It reduced imports from Russia last year, but that strategy backfired last month when Moscow sent Kiev a $7 billion bill for the gas it had refused to buy, citing a "take or pay" clause.

Although Ukraine has said it will not pay the bill, it is certain to shift the focus of the talks with Moscow, leaving the country with what it call exorbitant monthly gas bills.

For the long term, Ukraine is trying to diversify its energy sources by tapping its potentially large shale gas reserves and building a liquefied natural gas terminal on the Black Sea, but both projects will take years to implement. (Reporting by Olzhas Auyezov; Editing by Richard Balmforth and Jane Baird)

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