Gazprom and Ukraine work out details of deal to keep Russian natural gas flowing

The company, the world's largest producer of natural gas, and Ukraine agreed to eliminate middlemen from the domestic gas distribution market in Ukraine. A gas trading company partly owned by Gazprom has held this business since 2006, and had been much criticized. Yet a separate, and larger, middleman company may retain a role as an exporter of Russian and Central Asian natural gas to Ukraine, according to Gazprom's announcement.

Even Ukraine's president, Viktor Yushchenko, conceded in comments Thursday that the deal left some questions unanswered.

It also fell short of a demand by Ukraine's prime minister, Yulia Tymoshenko, a former gas trader turned critic of the business, to entirely eliminate middlemen who have been reaping huge fees by brokering trade between the state-controlled companies.

The dispute was the latest of many since the breakup of the Soviet Union, when Ukraine was left with export pipelines and Gazprom with gas fields.

Gazprom has traditionally subsidized Ukrainian domestic gas prices in exchange for access to the pipelines, spawning complex barter deals, constant renegotiations and, critics say, corruption.

Under the agreement announced Thursday, Ukraine's national gas company, Naftogaz, will take over most of the business of domestic gas distribution in Ukraine, eliminating a trading company called UkrGazEnergo. That company was half owned by Naftogaz and half by RosUkrEnergo, a separate intermediary that was in turn half owned by Gazprom.

Hence the arrangement, in place since January 2006, had provided Gazprom with a 25 percent stake in Ukraine's domestic natural gas distribution business, a role coveted by Gazprom in Ukraine and elsewhere as a means to add value to the company's commodity exports.

In exchange for unwinding this agreement, Ukraine will now allow Gazprom or "affiliated companies" direct access to 25 percent of Ukraine's market for industrial gas customers.

Gazprom also confirmed that Ukraine will pay $179 per 1,000 cubic meters, or 35,300 cubic feet, of gas for the remainder of 2008, but suggested prices could go up again in 2009. The figure is about half of what natural gas costs in Western Europe.

The statement said Ukraine would pay in full debts to RosUkrEnergo, though that company's role going forward remained unclear.

The deal received a lukewarm endorsement from Yushchenko.

"Generally I am O.K. with the arrangement because it is in the same context as it used to be," Yushchenko said, according to Agence France-Presse. He added that "there are some things that are to be assessed and accepted."

Kazakhstan wants Gazprom to pay more for the transit of Turkmen and Uzbek natural gas in 2009 when those states start charging more for their gas, the head of the Kazakh state energy company said Thursday, Reuters reported from Astana, Kazakhstan.

Gazprom said last week it had agreed to buy gas from the former Soviet states of Uzbekistan, Kazakhstan and Turkmenistan at prices close to what it charged European customers, minus transport and other costs.

"If the gas we buy becomes more expensive then, logically, the tariff will also grow," Uzakbai Karabalin, the chief executive of the state oil and gas company KazMunaiGas. This year Kazakhstan raised the transit fee to $1.40 per 1,000 cubic meters per 100 kilometers, or 62.1 miles, from $1.10 after price increases by both Turkmenistan and Uzbekistan that sell to Gazprom.