You're reading: Ukraine wants Russia to scrap new pipeline

Ukraine is trying to persuade Russia to scrap plans to build the new South Stream gas pipeline as part of negotiations with Russian gas export monopoly Gazprom, Ukraine's foreign minister said on Monday.

Kostyantyn Gryshchenko also said he did not expect Ukraine’s demand for a revision of a gas supply deal with Russia would lead to any disruption of supplies to Western Europe.

South Stream, an estimated 10 billion euro ($12.9 billion) project involving Gazprom and Italian oil firm Eni, aims to ship up to 63 billion cubic metres of Russian gas per year to central and southern Europe.

The pipeline, expected to become operational in 2015, is a rival to the EU-backed Nabucco pipeline, designed to bring gas from central Asia and the Middle East.

Gryshchenko said Ukraine was proposing modernising its own gas pipelines as an alternative to South Stream, which would transport Russian gas to Europe under the Black Sea, bypassing Ukraine.

"We are discussing issues related to the best possible use of our gas transportation system, which is the shortest, the most efficient route to bring Russian and central Asian gas to Europe," Gryshchenko said, speaking at the Chatham House thinktank in London.

"We believe that there is no need to build South Stream. That is a wasteful, unnecessary project that has not yet achieved the stage of no return," he said.

NO SUPPLY DISRUPTIONS

Gazprom said last month it had started a new round of talks with Ukraine’s state energy company, Naftogaz, on creating a joint venture, which the Russian company has said could be a step to a full-blown merger.

Gryshchenko said Ukraine needed to agree with Moscow on a formula to reassure Russia there would be no supply disruptions and that Ukraine pipelines "will be modernised and could be used for years to come as the most efficient, reliable way of bringing Russian gas to Europe".

However, he acknowledged that this was "unfortunately still not evident to our Russian partners".

"That is exactly what (is) being discussed in Moscow and other places with Gazprom," he said.

Since Kremlin ally Viktor Yanukovich was elected president in February, Ukraine’s ties with Moscow have greatly improved.

A Gazprom merger with Naftogaz would give Moscow control of the major gas pipelines that run through Ukraine to Europe.

Gryshchenko said there was a political component to the negotiations. "There are always compensators for any particular deal in the field of either transportation (or) economic cooperation," he said.

But he said Ukraine would not enter into an "unjust and inequitable" agreement with Gazprom.

In an interview with Reuters Insider television, Gryshchenko said new factors, such as large shale gas finds in the United States and liquefied gas from the Middle East, supported Ukraine’s demand for a revision of a 10-year gas supply deal with Russia. Ukraine wants a price cut.

Previous "gas wars" between the two ex-Soviet nations have disrupted supplies to Europe.

Gryshchenko said neither Russia nor Ukraine would do anything to endanger the reliability of gas supplies to Europe.