* Gas will figure high in Yanukovich's March 4 visit to
* Yanukovich hints at concession to Moscow on gas pipeline
* Bitterly blames jailed Tymoshenko for gas contract
By Richard Balmforth
KIEV, March 1 Ukraine's president, set for tough
talks with Russia's Vladimir Putin on the price of gas imports,
hinted on Friday that Kiev might compromise over its gas
pipeline network to try to secure lower energy prices from its
Ukraine, a transit route for more than half of Russian gas
shipped to the European Union, and itself heavily reliant on
Russian supplies, has repeatedly clashed with Moscow over the
price of its imports.
But Moscow is seeking concessions from the former Soviet
republic, such as joining a Russia-led trade bloc or giving up
control over its pipeline network, in exchange for reviewing
terms of a 2009 10-year gas deal which the present Kiev
government says fixed an exorbitant price for gas.
Ukraine has balked at Moscow's demands, which might endanger
a lucrative trade deal with the European Union, and has so far
failed to persuade Moscow to reduce the price.
Speaking at a news conference on Friday, Yanukovich said the
price Ukraine paid for its gas from Russia - around $430 per
1,000 cubic metres - is "the noose around our neck".
"It is the biggest issue, the worst problem we have to face
today," he said, adding that the 2009 contract brokered by his
jailed opponent, former Prime Minister Yulia Tymoshenko, was
costing the country $6 billion per year.
But Yanukovich, who is to meet Putin on March 4 outside
Moscow, reinstating a trip hastily cancelled in December, hinted
that Kiev might be ready to cede some ground over control of its
gas pipeline system which funnels Russian gas to Europe.
"We do not want to trade our sovereignty over this issue and
we will not do that. But it is clear that we have to make some
concessions somewhere, find the price that Russia will accept in
order to review the contract," he said.
He suggested this could take the shape of a joint venture
between Ukraine and Russia in which Russian gas monopoly Gazprom
rented part or all of Ukraine's pipeline system.
"Our proposal is very simple. The pipeline network would
remain state property. Maybe, a future company could rent this
pipeline and provide guarantees of transit volume and work on
upgrading the pipeline," he said.
A Kremlin spokesman said, however, that no contracts were
expected to be concluded during Yanukovich's visit. "We are not
planning to sign anything," Putin's press secretary, Dmitry
Peskov, told reporters in Pskov, western Russia.
"Gas will certainly be discussed ... it will mainly be a
one-on-one conversation between the two heads of states with an
accent on gas issues, energy," Peskov said.
Yanukovich had been due to discuss gas prices with Putin in
December, but the Ukrainian leader pulled out at the last
minute, saying more time was needed to draft official documents.
The timing of Yanukovich's forthcoming visit to Russia,
after talks with EU officials in Brussels on Monday, highlights
the thin line the Kiev leadership is treading in trying to
maintain close links with both the 27-member EU bloc and Moscow.
Though Russia remains Ukraine's "strategic partner", the
Kiev government has set as priority goals integration into the
European mainstream and close ties with the EU.
EU officials on Monday in effect warned Yanukovich not to be
tempted by membership of a Russia-led Customs Union which they
told him was not compatible with joining an EU free trade
agreement and would jeopardise the signing of a landmark
political association possibly later this year.
The EU has set a November target for signing the proposed
agreement on free trade and political association to anchor
Ukraine into the Western camp.
But it says a deal is conditional on Ukraine improving its
human rights record and addressing "politically motivated
convictions" - a reference to the jailing of Tymoshenko which
Western governments have condemned.
Answering reporters' questions on Friday, Yanukovich said
Tymoshenko had "virtually falsified" documents and abused her
power by signing a government directive which cleared the way
for the 2009 deal between Gazprom and Ukraine's state gas
"Tymoshenko is suffering for what she has done, but why
should the country suffer too, paying for this contract until
2019?" he said.
Apart from the seven-year jail sentence she is serving for
abuse of office, Tymoshenko also faces a second trial for
alleged embezzlement and tax evasion.
Separately, Ukraine's state prosecutor says Tymoshenko is
being investigated on suspicion of organising the murder of a
business rival in 1996, a charge which could bring her a life
sentence if convicted. Tymoshenko denies all the criminal
charges levelled against her.