* Russian envoy says deal could be signed on Dec. 18
* Not clear what concessions Kiev is ready to make
* Ukraine has offered Russia a compromise trade bloc deal
* Stand-off over gas price unnerves European consumers
By Olzhas Auyezov
KIEV, Dec 12 Russia and Ukraine might be close
to signing a new gas supply deal next week, ending a long-term
stand-off that has repeatedly threatened Europe's energy
security, officials from both sides indicated on Wednesday.
Ukraine, a large buyer of Russian gas and a major transit
nation for Russia's exports by pipeline to Western Europe, says
Moscow is charging far too much for the fuel under a 10-year
contract signed by the previous Ukrainian government in 2009.
Moscow is seeking significant political and economic
concessions from Ukraine in exchange for reviewing the gas deal,
such as joining a Russia-led trade bloc - which would mean Kiev
giving up its strategic goal of European integration.
On Wednesday, officials on both sides hinted at a possible
agreement - although on several occasions in the past such
indications turned out to be false, leaving European buyers of
Russian gas worried about potential supply disruptions.
Clashes between Kiev and Moscow that led to interruptions in
the Western flow of gas via Ukraine seriously disrupted European
supplies in 2006 and 2009, causing countries including Bulgaria
and Slovakia to be without energy in the depths of winter.
Commenting on rumours that Ukrainian President Viktor
Yanukovich would visit Moscow on Dec. 18 to sign a new gas deal,
Russia's ambassador to Ukraine, Mikhail Zurabov, said the trip
could indeed take place if the deal is ready by that time.
"If this meeting happens on the 18th - and work is under way
on its agenda and content - it will happen only if there is an
agreement to be reached," Interfax news agency quoted him as
Separately, Interfax quoted an aide to Russian President
Vladimir Putin as saying that a meeting between Putin and
Yanukovich was being discussed though no date had yet been set.
Russia's pipeline gas export monopoly, Gazprom,
declined to comment. But in a statement it said its chief
executive Alexei Miller met Ukrainian Energy Minister Yuri Boiko
in Moscow on Wednesday.
On the Ukrainian side, Kommersant-Ukraine newspaper quoted
an unnamed central bank source who also said he expected a new
deal with Russia soon, probably before a fresh round of talks
with the International Monetary Fund (IMF) in late January.
Getting a significant discount from Russia could help Kiev
secure fresh IMF support without raising gas and heating prices
for households, the source said.
Europe has a major interest in seeing the issue resolved as
it gets around a quarter of its gas from Russia and around two
thirds of this still flows via Ukraine, although Moscow has been
developing alternative routes.
WHAT IS THE TRADE-OFF?
The consensus among analysts is that, for a deal to
materialise, Ukraine will have to make some major concessions.
One of Russia's ambitions has been to gain control of
Ukraine's pipelines and other energy infrastructure. Kiev has
long refused to privatise the gas pipelines, seeing them as
strategic assets and a source of leverage over Moscow.
"It could be the (Ukrainian gas) pipelines... and Russia
could be also interested in our underground gas storage
facilities," Kiev-based political analyst Volodymyr Fesenko
Ukraine has refused to join the post-Soviet Customs Union of
Russia, Belarus and Kazakhstan as that would mean scrapping
plans to sign a free trade agreement with the European Union.
Russia sells its gas to Belarus at about $170 per thousand
cubic metres, about 40 percent of the price that Ukraine pays.
Ukraine's free trade deal with the EU has been agreed in
principle, but was shelved after a court jailed former prime
minister Yulia Tymoshenko on charges of abuse of office in 2011
- over the same 2009 gas deal Kiev is trying to renegotiate.
Kiev, however, says European integration remains its
priority and has offered Moscow a compromise solution - signing
a separate trade pact with the customs union.
Whichever concession he chooses to make now, Yanukovich will
face accusations from opponents of betraying national interests.
But a deal with Russia may be the only way to revive
economic growth and cut the ballooning budget deficit without
resorting to politically risky austerity policies two years
ahead of the 2015 presidential election.
So far, Russia and Ukraine have been using a costly strategy
of attrition in the dispute.
Kiev this year started cutting gas imports while Moscow
threatens to leave Ukraine without gas transit fees worth about
$2.5 billion a year by building alternative pipelines - such as
the $20 billion South Stream - to ship the fuel to Europe.
Although Ukraine's import cuts - to 27 billion cubic metres
this year from about 40 bcm in 2011 - mean it will pay billions
of dollars less to Gazprom, they come at a cost.
Ukraine announced this week it had borrowed $3.7 billion
from China's Development Bank to finance the conversion of its
power plants from burning gas to coal.
Kiev's other energy projects, such as launching shale gas
production and building a liquefied natural gas (LNG) terminal
on the Black Sea, require billions of dollars in investments.