January 28, 2011 / 7:04 PM / 6 years ago

Ukraine hits Russia gas plans, inks Azeri deal

4 Min Read

<p>Ukraine's President Viktor Yanukovich attends a session at the World Economic Forum (WEF) in Davos, January 28, 2011.Christian Hartmann</p>

DAVOS (Reuters) - Ukraine's president clinched energy pacts with Azerbaijan on Friday and attacked Russia for plans to bypass his country in supplying gas to Europe, reviving market fears of regular spats between Moscow and Kiev.

Markets were relieved when Viktor Yanukovich, perceived as friendlier to the Kremlin than his predecessor, Viktor Yushchenko, was elected Ukraine's president last year.

That followed five years of disputes between the ex-Soviet neighbors, marked by mid-winter cuts in Russian gas supplies to Europe that represent a quarter of the continent's total needs.

But Yanukovich has played a much less pro-Moscow role than expected since taking office, saying the European Union was an equally or even more important partner than Russia.

Speaking at the World Economic Forum in Davos, the president lashed out at new Russian pipeline projects and signed oil and gas deals with Azerbaijan to cut Ukraine's reliance on Russia.

Yanukovich said Ukraine shared Poland's concerns about political motives behind the Nord Stream pipeline to supply Russian gas to Western Europe along the Baltic Sea floor, bypassing central European nations.

"Another project being discussed today between Russia and Europe is the construction of South Stream. This possibility is directly related to Ukraine and here I share the position of Poland," he said, referring to a project to pipe gas under the Black Sea to southern Europe.

Russia ships about 80 percent of its gas exports to Europe through Ukraine now and the remaining 20 percent via Belarus and says it needs the new projects to boost Europe's energy security after disruptions in previous years.

Yanukovich said South Stream would cost $25 billion while it would cost much less to upgrade Ukraine's pipeline system.

"Why are our partners today pretending that there is no alternative. A year ago we proposed a project that would cost five times less -- not more than $5 billion, it would come to the same destination points to which South Stream would go.

"That's why we ask the same question, speaking eye-to-eye with our partners, and we are still waiting for an answer....

"If this is a way to exert pressure, not a commercial project, then of course serious questions arise about how we should build our relations today, let alone in the future."

Azeri Gas and Oil

Yanukovich used the Davos platform to sign a deal with Azeri President Ilham Aliyev to import liquefied natural gas to a planned Ukrainian terminal aimed at reducing the country's heavy dependence on Russian gas.

The memorandum did not specify volumes for the terminal to be opened in 2015. He also signed a memorandum on cooperation in shipping Azeri oil across Ukraine.

Yanukovich said Ukraine would ship the first million tons of Caspian Sea oil to Europe via the pipeline this year, thus ending its use to export Russian crude to the Mediterranean.

"The Odessa-Brody pipeline has been used in various directions. Very soon we will start working according to the original idea, delivering oil from Odessa to European countries," he said.

Interfax news agency quoted Ukrainian officials as saying the deal covered deliveries of up to 4 million tons a year.

Aliyev, who spoke at the same panel, said he was under no pressure from Russia to shun the Nabucco pipeline, seen as a key European Union's attempt to reduce reliance on Russian gas.

Writing by Dmitry Zhdannikov; editing by Mark Heinrich

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