Russia-Ukraine middleman may hold key to gas talks

By Guy Faulconbridge - Analysis

KIEV (Reuters) - A Swiss-based trader that sells Ukraine all its imported gas may be a key obstacle to resolving a dispute with Russia that has caused the worst disruption to European gas supplies in years, officials and analysts said.

Russia turned the gas off to Ukraine from Jan 1. over unpaid bills and gas prices. After the row deepened, Russian gas flows to Europe were also halted with Moscow accusing Kiev of blocking supplies and Ukraine saying Russia suspended deliveries.

As a flurry of talks take place to find a resolution to the dispute, the name of RosUkrEnergo (RUE) -- which is domiciled in Zug, Switzerland -- is increasingly being mentioned by senior officials in both Ukraine and Russia as a sticking point.

Ukraine says it buys all of its imported gas from RUE, a 50/50 joint venture between Russian state-controlled gas behemoth, Gazprom, and two Ukrainian businessmen. RUE in turn buys Russian and Central Asian gas from Gazprom.

But opponents, such as Ukrainian Prime Minister Yulia Tymoshenko and some Gazprom minority shareholders, have questioned why the intermediary is needed at all.

That has provoked fevered speculation about who ultimately benefits from RUE and made it a political football in both the dispute between Tymoshenko and Ukrainian President Viktor Yushchenko and the row with Russia.

A RUE spokesman denied that Ukrainian or Russian politicians have commercial interests or benefit from its activities.

When asked about RUE, Russian Prime Minister Vladimir Putin said on Thursday that Gazprom was ready to sign a direct contract with Ukraine's state-run energy company, Naftogaz, but that Ukraine was not allowing it to.

"We are ready to sign a direct contract with Naftogaz Ukraine, but they are not allowing us to do that," Putin told reporters at a news briefing.

Gazprom and senior Ukrainian officials have repeatedly said they are ready to get rid of RUE, but the firm has been kept in the bilateral gas trade every year.

GAS TRADER

In October 2008, Tymoshenko and Putin signed a memorandum that stipulated that gas supply intermediaries like RUE would be scrapped. But Putin said on Thursday that corrupt officials in Kiev were taking advantage of a "political collapse" in Ukraine.

"This speaks of a high level of corruption in political structures which are today, in these conditions, fighting for gas prices and for the chance to preserve this or that intermediary to use dividends from them for personal enrichment and for future political campaigns," Putin said.

Ukraine's Fuel and Energy Ministry said on Wednesday that RUE had helped cause the whole row. Tymoshenko has repeatedly said RUE is "a corrupt intermediary" which is being protected by top politicians.

"We are not occupied with politics we are occupied with business," a RUE spokesman said. "Business involves contracts and the timely, proper fulfillment of obligations by all sides. We strive to do that and we expect the same from counteragents."