Ukraine's new leaders said on Wednesday only a deal with Russia on a new price for gas supplies was holding up the draft state budget for 2010 and they expressed confidence in reaching an agreement with Moscow. "The only unresolved issue remaining for us now is the price of gas which we get from Russia. As soon as we have a new price for gas, we will send the draft budget to parliament," First Deputy Prime Minister Andriy Klyuev told journalists.
The new leadership of President Viktor Yanukovich says a 10-year agreement signed in January 2009 exacts an unfair price from the ex-Soviet republic for supplies of Russian natural gas. The price of Russian gas imports is a major drag on Ukraine's economy which was hit hard by the global downturn. Ukraine's hopes of securing a resumption of International Monetary Fund bailout credit by holding to a relatively tight state budget deficit in 2010 has placed even more relevance on gas prices.
The government last week committed itself to trying to hold to a budget deficit of 6 percent of gross domestic product - including the deficit incurred by state energy holding Naftogaz - as a condition for resumption of the $16.4 billion IMF bailout, which was suspended last year.
Prime Minister Mykola Azarov expressed confidence Ukraine would secure a revision of the current agreement between Kiev and Moscow. "We will achieve a revision of the gas agreements", Azarov told a cabinet meeting on Wednesday. "I think that soon we will find a consensus with the Russian leadership and the price of gas will be lowered," Klyuev told journalists.
Precise details on the price that Ukraine is asking Moscow to agree to are hard to come by. Under the 2009 agreement, Ukraine pays for its gas on a monthly basis, with the bill varying according to consumption. Interfax Ukraine news agency said on Tuesday Naftogaz had met its bill for March - estimated at $576 million.
Ukraine was paying $305 per 1,000 cubic metres in the first quarter. But Azarov said on Tuesday a rise in the price of Russian gas to $330 per tcm would bring Ukraine's key chemical sector to a halt and seriously hurt the competitiveness of its metals industry.
Klyuev told journalists that the draft budget could not be finalised by the government and presented to parliament until the gas price issue had been settled. Yanukovich and Azarov have held talks with Russian leaders on the issue and, as an enticement for a softer deal on prices, are holding out the prospect of a role for Russia in modernising Ukraine's pipeline system. Russian Prime Minister Vladimir Putin has said he is willing to reopen discussion of gas prices though he says he sees nothing wrong with the present agreement.
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