Publication: Monitor Volume: 1 Issue: 128

On November 3 in Moscow, the prime ministers of Russia and Ukraine, Viktor Chernomyrdin and Evhen Marchuk, finalized an agreement on Russian gas supplies to Ukraine in 1996. According to Russian media reports, Russia’s Gazprom will deliver 50 billion cubic meters, down from 52 billion in 1995 and 56 billion in 1994, at a cost of $80 per 1,000 cubic meters. A relatively small part of the overall bill will be offset by Ukrainian transit fees on Russian gas piped westward. Russian gas in Ukrainian transit will be legally treated as separate from the gas destined to Ukraine and immune to Ukrainian use. The agreement’s essentials were negotiated by Gazprom chairman Rem Vyakhirev (Chernomyrdin’s successor in that job) in Kiev last week. (8)

The looming gas bill for 1996 is likely to push Ukraine back into serious indebtedness to Moscow, increase the latter’s economic and political leverage, and necessitate increased balance-of-payment support from the West. Kiev’s efforts to diversify its energy supply sources have not had a chance to bear fruit yet.