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Tuesday, 28 June 2005
Ukraine to pay 100% Cash for Turkmen Gas Deliveries
Topic: Economy & business
Ashgabat, 24 June 2005 (nCa) --- It was decided Friday during a meeting between President Niyazov and the Ukrainian delegation headed by Chairman of NeftegazUkrainy that in future Ukraine would pay 100% cash for the natural gas it buys from Turkmenistan. Barter element has been eliminated.

According to the document signed between the two countries, starting 1 July 2005 Ukraine would pay entirely in cash for the gas volumes it obtains from Turkmenistan.

The new price – actually the old price of December 2004 level, sans barter element – would be US $ 44 per 1000 cubic meters.

It must be recalled that up to December 2004, Turkmenistan was shipping its volumes to Ukraine at US $ 44 per 1000 cubic meters but the supplies were halted because of the concerns that Ukraine was charging unrealistically high prices for the items it supplied under gas-for-goods plan. The arrangements then allowed for 50% payment in cash and 50% in the shape of goods and services.

When Turkmenistan stopped gas supplies to Ukraine on 1 January 2005, the problem was resolved after three rounds of negotiations by agreeing that the supplies would be resumed to Ukraine at US $ 58 per 1000 cubic meters. Barter element remained in place.

However, as it turned out later, Turkmenistan again had the reason to complain that Ukraine was not keeping to its end of the bargain. A circular issued by the foreign office of Turkmenistan asserted that Ukraine had failed to supply items worth about US $ 600 million for the barter portion of gas volumes. Most of the accumulated debt was incurred during the first five months of this year.

There were also bitter complaints that Ukraine was again charging very high prices for the barter items. At one point, President Niyazov called it a “mechanism for swindling”.

During the last one week some top officials of the oil and gas sector of Turkmenistan were fired for being instrumental in obtaining exorbitantly priced items from Ukraine, presumably because of some personal gratification.

The new documents signed this Friday would bring transparency to the process of exporting Turkmen gas to Ukraine.

Turkmenistan has reduced the gas price from US $ 58 to US $ 44 per 1000 cubic meters but the entire payment must now be made in hard cash.

Moreover, under the new understanding between the two countries, Ukraine must clear the outstanding log of barter items by December 2005. It is also stipulated in the documents signed today that prices of items supplied under this scheme must be “similar to average world market prices.”

Turkmenistan would not allow any rise in the prices until the outstanding debt is cleared.

The new agreement comes in force on 1 July 2005 and would remain valid in 2006.

Even though Ukraine had rejected categorically a few days ago any possibility for switching to 100% cash payment, it was clear by this afternoon that Ukraine would prefer long-term partnership with Turkmenistan rather than short sighted squabbles.

In all, four documents were signed during Niyazov-Ivchenko meeting. These include revised payment system, supplementary agreement on delivery of barter goods by 31 December 2005, increase in the volume of investment gas from 4.5 bcm to 5 bcm for 2006 and allocation of investment gas to Ukrainian companies working in Turkmenistan.

Alexi Ivchenko, head of NaftegazUkrainy, signed the documents on behalf of his government.

Posted by countryturkmenistan at 10:45 AM

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