Identifier
Created
Classification
Origin
07KYIV2671
2007-10-23 12:34:00
CONFIDENTIAL
Embassy Kyiv
Cable title:
UKRAINE:TALK OF REMOVING RUE FROM GAS DEAL
how-toVZCZCXRO7088 PP RUEHDBU DE RUEHKV #2671/01 2961234 ZNY CCCCC ZZH P 231234Z OCT 07 FM AMEMBASSY KYIV TO RUEHC/SECSTATE WASHDC PRIORITY 4170 INFO RUCNCIS/CIS COLLECTIVE RUEHZG/NATO EU COLLECTIVE RHEBAAA/DEPT OF ENERGY WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 02 KYIV 002671
SIPDIS
SIPDIS
DEPT FOR EUR/UMB, EEB/EEC/IEC - GALLOGLY/WRIGHT
DOE FOR LEKIMOFF, CCALIENDO
MOSCOW FOR LYON
E.O. 12958: DECL: 10/22/2017
TAGS: EPET ETRD PREL RS UP
SUBJECT: UKRAINE:TALK OF REMOVING RUE FROM GAS DEAL
INCREASES
REF: A. KYIV 2611
B. MOSCOW 5069
Classified By: Ambassador, Reasons: 1.4 B) AND D)
C O N F I D E N T I A L SECTION 01 OF 02 KYIV 002671
SIPDIS
SIPDIS
DEPT FOR EUR/UMB, EEB/EEC/IEC - GALLOGLY/WRIGHT
DOE FOR LEKIMOFF, CCALIENDO
MOSCOW FOR LYON
E.O. 12958: DECL: 10/22/2017
TAGS: EPET ETRD PREL RS UP
SUBJECT: UKRAINE:TALK OF REMOVING RUE FROM GAS DEAL
INCREASES
REF: A. KYIV 2611
B. MOSCOW 5069
Classified By: Ambassador, Reasons: 1.4 B) AND D)
1. (C) Summary: Local reaction to Gazprom Chairman
Medvedev's comments (ref b) about removing RosUkrEnergo (RUE)
from the gas deal have ranged from positive to muted.
Minister of Fuels and Energy Boyko told Ambassador he had
heard nothing from the Russians about possibly removing RUE
from the gas deal. Both Boyko and First Deputy Prime
Minister Azarov made the traditional argument of RUE
proponents that removing RUE from the deal would lead to much
higher prices from Gazprom. Tymoshenko and her advisers were
more positive, strongly supporting the idea of a direct gas
relationship. Oleksandr Shlapak of the Presidential
Administration was also positive but a bit more cautious,
saying direct relations with Gazprom might have to wait until
2009. End Summary.
BOYKO - NO ONE TALKED TO ME ABOUT IT
2. (C) Medvedev's October 15 comments were widely carried
here, but even earlier there had been speculation, based on
Yulia Tymoshenko's campaign promises to extract RUE for the
gas deal, that direct gas relations might be possible. In an
October 11 meeting (ref a),Boyko disavowed the idea that
direct gas relations might be possible. He stated no one in
Moscow had raised this possibility with him so far. In
Boyko's view, the only way Gazprom would agree to direct gas
relations is if Ukraine paid the full price of $230/thousand
cubic meters (tcm). He expected in any case that Gazprom
would wait until a new government was formed in KYIV to
address the issue of 2008 gas prices; he expected them to
fight with others on gas prices first, like Belarus and
Lithuania.
AZAROV ONLY CARES ABOUT PRICE
3. (C) Azarov's initial public reaction to Medvedev's
comments was contradictory. In one comment he said direct
gas relations were worth studying, but speaking to another
reporter he said that canceling the existing gas relationship
would take Ukraine back to the debacle of early 2006.
Meeting with the Ambassador October 18, Azarov professed to
care only about the price Ukraine paid for gas and did not
care whether a middleman was involved or not. He argued
direct gas relations would mean paying the full price of
$230/tcm. However, he noted that both Russia and Ukraine
realized middlemen had a cost, and would seek to reduce
intermediaries' role.
TYMOSHENKO PRAISES THE RUSSIANS
4. (U) Tymoshenko, who has long publicly called for ejecting
RUE, was very positive. She told the press in reaction to
Medvedev's statements, "It is very good that Russia has
supported our concept of the relationship." She promised
there would be "well-balanced and moderate" gas pricing after
formation of a new government and termination of RUE's role.
Oleksandr Gudyma, her adviser on energy policy issues,
commented that the statements meant Gazprom was caring for
its international image, which had been damaged by such
non-transparent schemes. He expected that abolishing such
intermediaries would give Gazprom access to greater profits.
PRESIDENT'S MAN CAUTIOUS
5. (U) First Deputy Chief of the Presidential Administration
Oleksandr Shlapak told a press briefing October 10 that he
hoped Russia and Ukraine could eliminate gas intermediaries
by 2009. He noted that although the Ukrainian side might
raise the issue in negotiations for the 2008 prices and
deliveries, he was unsure if direct relations would be
possible by then.
6. (C) Comment: Many here were pleasantly surprised to hear
a senior Gazprom official like Medvedev broach the idea of
removing intermediaries from the deal. However, some feel
this may be a ploy, since there is no concrete sign Gazprom
is ready to offer prices to Ukraine below $230/tcm without
RUE. We also doubt that Ukrainians have suddenly seen the
light that intermediaries reduce transparency and increase
costs. More likely, it is just that as the gas price creeps
closer to European levels, the justification for an
intermediary correspondingly diminishes. End comment.
KYIV 00002671 002 OF 002
Taylor
SIPDIS
SIPDIS
DEPT FOR EUR/UMB, EEB/EEC/IEC - GALLOGLY/WRIGHT
DOE FOR LEKIMOFF, CCALIENDO
MOSCOW FOR LYON
E.O. 12958: DECL: 10/22/2017
TAGS: EPET ETRD PREL RS UP
SUBJECT: UKRAINE:TALK OF REMOVING RUE FROM GAS DEAL
INCREASES
REF: A. KYIV 2611
B. MOSCOW 5069
Classified By: Ambassador, Reasons: 1.4 B) AND D)
1. (C) Summary: Local reaction to Gazprom Chairman
Medvedev's comments (ref b) about removing RosUkrEnergo (RUE)
from the gas deal have ranged from positive to muted.
Minister of Fuels and Energy Boyko told Ambassador he had
heard nothing from the Russians about possibly removing RUE
from the gas deal. Both Boyko and First Deputy Prime
Minister Azarov made the traditional argument of RUE
proponents that removing RUE from the deal would lead to much
higher prices from Gazprom. Tymoshenko and her advisers were
more positive, strongly supporting the idea of a direct gas
relationship. Oleksandr Shlapak of the Presidential
Administration was also positive but a bit more cautious,
saying direct relations with Gazprom might have to wait until
2009. End Summary.
BOYKO - NO ONE TALKED TO ME ABOUT IT
2. (C) Medvedev's October 15 comments were widely carried
here, but even earlier there had been speculation, based on
Yulia Tymoshenko's campaign promises to extract RUE for the
gas deal, that direct gas relations might be possible. In an
October 11 meeting (ref a),Boyko disavowed the idea that
direct gas relations might be possible. He stated no one in
Moscow had raised this possibility with him so far. In
Boyko's view, the only way Gazprom would agree to direct gas
relations is if Ukraine paid the full price of $230/thousand
cubic meters (tcm). He expected in any case that Gazprom
would wait until a new government was formed in KYIV to
address the issue of 2008 gas prices; he expected them to
fight with others on gas prices first, like Belarus and
Lithuania.
AZAROV ONLY CARES ABOUT PRICE
3. (C) Azarov's initial public reaction to Medvedev's
comments was contradictory. In one comment he said direct
gas relations were worth studying, but speaking to another
reporter he said that canceling the existing gas relationship
would take Ukraine back to the debacle of early 2006.
Meeting with the Ambassador October 18, Azarov professed to
care only about the price Ukraine paid for gas and did not
care whether a middleman was involved or not. He argued
direct gas relations would mean paying the full price of
$230/tcm. However, he noted that both Russia and Ukraine
realized middlemen had a cost, and would seek to reduce
intermediaries' role.
TYMOSHENKO PRAISES THE RUSSIANS
4. (U) Tymoshenko, who has long publicly called for ejecting
RUE, was very positive. She told the press in reaction to
Medvedev's statements, "It is very good that Russia has
supported our concept of the relationship." She promised
there would be "well-balanced and moderate" gas pricing after
formation of a new government and termination of RUE's role.
Oleksandr Gudyma, her adviser on energy policy issues,
commented that the statements meant Gazprom was caring for
its international image, which had been damaged by such
non-transparent schemes. He expected that abolishing such
intermediaries would give Gazprom access to greater profits.
PRESIDENT'S MAN CAUTIOUS
5. (U) First Deputy Chief of the Presidential Administration
Oleksandr Shlapak told a press briefing October 10 that he
hoped Russia and Ukraine could eliminate gas intermediaries
by 2009. He noted that although the Ukrainian side might
raise the issue in negotiations for the 2008 prices and
deliveries, he was unsure if direct relations would be
possible by then.
6. (C) Comment: Many here were pleasantly surprised to hear
a senior Gazprom official like Medvedev broach the idea of
removing intermediaries from the deal. However, some feel
this may be a ploy, since there is no concrete sign Gazprom
is ready to offer prices to Ukraine below $230/tcm without
RUE. We also doubt that Ukrainians have suddenly seen the
light that intermediaries reduce transparency and increase
costs. More likely, it is just that as the gas price creeps
closer to European levels, the justification for an
intermediary correspondingly diminishes. End comment.
KYIV 00002671 002 OF 002
Taylor