Russia wants to develop Ukraine's pipeline network and increase the amounts of Russian oil and gas shipped across Ukraine, two of Russia's most powerful businessmen said at a press conference in Kyiv on Thursday.
Gazprom chairman Rem Vyakhirev said his company wants to help finance the extension of a gas pipeline from southern Russia across southern Ukraine and on via Romania and Bulgaria to Turkey. He suggested that Gazprom participate in setting up a Ukrainian company dedicated to building the pipeline, and then attract credit against Gazprom's guarantee.
Vyakhirev said Turkey might also help finance the project. President Leonid Kuchma, who also spoke at the press conference, said a Gazprom delegation would discuss the proposal with Turkish officials later this month.
Lukoil president Vagit Alekperov expressed his company's interest in helping build a new oil-shipping terminal in Odessa and pipeline connecting that terminal to Ukraine's existing network. Kuchma said afterward that 'Russian big business' may take part in the privatization of oil refineries in Odessa and elsewhere in Ukraine.
Lukoil is one of Russia's biggest oil companies, and Gazprom has a near monopoly on the production and distribution of Russian gas. Forbes magazine this month estimated Vyakhirev's and Alekperov's personal fortunes at $1.4 billion and $1.2 billion, respectively.
Prior to the press conference, Prime Minister Valery Pustovoitenko announced that he had agreed in a meeting with Vyakhirev and Alekperov to hold a 'roundtable meeting' of Russian and Ukrainian 'entrepreneurs' in July. He suggested the meeting could help bring about a 'step by step' elimination of barter trade.
Barter trade is a major headache for both the Ukrainian government and Gazprom.
Although Gazprom makes huge profits from its gas deliveries to the West, most of its customers in the former Soviet Union – including those in Ukraine – are chronically behind in their payments, and they almost never pay in cash.
While Gazprom founder Viktor Chernomyrdin was prime minister, the Russian government was understanding of Gazprom's cash-flow problems, and allowed the company to rack up huge tax arrears.
The new government in Moscow is less convinced of Gazprom's penury, and has even seized property and frozen assets belonging to two Gazprom subsidiaries in an effort to force the company to cough up some cash.
That has prompted Gazprom to crack down on delinquent customers. On June 15, Gazprom halved its gas deliveries to Moldova and Belarus. Moldova, which relies on gas to produce electricity, has been forced to intermittently shut off power throughout the country.
Ukraine's aggregate debt to Gazprom stands at around $1.2 billion, which is more than the amounts owed by Belarus and Moldova combined.
Yet Ukraine has managed to stave off the kind of heavy-handed actions Gazprom has taken against its northern and southwestern neighbors, apparently due to Kuchma's and Pustovoitenko's good relations with Gazprom management.
When Vyakhirev last met with the Ukrainian president and prime minister in mid-May, he agreed to allow Ukraine to put off some of its gas payments from September to October and inked a preliminary agreement on restructuring some of Ukraine's older debts, to be finalized this fall.
Kuchma in turn gave seats on his foreign investment advisory council to Vyakhirev and to Alexander Lebedev, chairman of the Gazprom-affiliated National Reserve Bank of Russia.
Also in May, Lebedev announced plans to found a bank in Ukraine to help finance the Russian-Ukrainian AN-70 military cargo plane, and Gazprom inked a joint-venture deal with Crimea's Chernomorneftegaz to explore the Azov Sea and Black Sea shelves.
But Gazprom's relationship with Ukraine hasn't been all tea and roses. Gas deliveries via the pipeline Vyakhirev wants to extend – which currently dead-ends in Berdyansk, eastern Ukraine – were cut by 50 percent in early April, pending payment from various enterprises in the Donetsk region. Fearing a shortage this winter, the Donetsk regional administration has ordered the hurried construction of a new link to Ukraine's main gas network.
Pipes for the new link are coming from the Khartsyzsk steel plant, which had been in desperate need of an outlet for its production since Gazprom canceled a deal under which it accepted pipes as payment for gas.
Industry Ministry officials cited by Interfax said that largely because that deal ended, exports of steel pipes to Russia over the first five months of this year were down by almost 80 percent from the same period last year.
