December 5, 2013 7:04 pm

Gazprom dismisses price cut for Ukraine as ‘naive and primitive’

Gazprom, the Russian energy group, has denied that Russia would cut the price it charges Ukraine for its gas if Kiev joined a Moscow-led economic bloc, dismissing such an idea as “naive and primitive”.

The comments came as anti-government protesters in Ukraine appeared to be settling into a tense and potentially lengthy stalemate with the government, with the opposition dismissing a government offer to discuss early parliamentary elections.

Viktor Yanukovich, Ukraine’s president, was expected on Friday to stop in Moscow on his way home from a visit to China, though officials declined to confirm the trip would definitely still happen.

This would be Mr Yanukovich’s first visit to Russia since he froze preparations to sign a landmark integration agreement with the EU to instead repair ties with Moscow – which had pressured Kiev to abandon the EU deal.

The freezing of the EU deal sparked protests in Ukraine that have since mushroomed into the biggest political unrest since the 2004 Orange revolution.

Vladimir Putin, Russia’s president, is widely believed in Kiev to have offered Mr Yanukovich help in shoring up its ailing economy, including a cut in the price it pays for Russian gas.

But in an interview with the Financial Times, Alexander Medvedev, Gazprom’s deputy chief executive and head of its export arm, said there was “no way this topic was ever on the agenda”.

“We’re not in a bazaar,” he said. “We have proved that we don’t connect our commercial activity . . . with political exercises,” he said.

Mr Medvedev did confirm, however, that discussions were under way to restructure or defer Ukraine’s $2bn debt to Gazprom.

The political crisis continued to put pressure on Ukraine’s finances, with the hryvnia sliding against the dollar on Thursday. Analysts suggested the national bank might be trying to push down its value to conserve scarce foreign exchange reserves.

Mr Yanukovich ended his China visit with announcements of $8bn of potential investments. But it was unclear how much of the figure was new, and there appeared to be no big new loans to help shore up Ukraine’s state finances.

Opposition leaders in Kiev on Thursday said snap parliamentary elections would not be enough to defuse the stand-off, but only Mr Yanukovich’s resignation.

The demonstrations reflect anger not just about the EU agreement and violence against a small group of protesters last Saturday, but with a regime seen as authoritarian and corrupt.

This weekend may be an important test of broader public support, if the demonstrations can muster anything like the several hundred thousand people who flocked into Kiev last Sunday.

Another mass turnout could put further pressure on the president and government to make concessions, analysts said. But smaller numbers could lead to disillusionment among protesters about lack of progress in forcing political change.

“It’s not possible for the crowds to take power by force . . . the authorities simply won’t allow this,” said Vadim Karasiov, director of Kiev’s Global Strategy Institute.

Mr Karasiov said an “optimal scenario” would be for a caretaker government to assume power and agree to sign the EU agreement by a specific date, followed by snap parliamentary elections. Presidential elections would follow as scheduled in spring 2015.

“The reality is that the president won’t resign and his ruling party won’t agree to snap parliamentary elections because they will lose. They need to be forced into this,” Mr Karasiov added.

Some government insiders in Kiev and Ukrainian businessmen believe, however, that Mr Yanukovich reached a secret deal with Mr Putin in two meetings last month.

Despite Mr Medvedev’s insistence that Russia would not trade a lower gas price for membership of a Moscow-led customs union, senior Russian officials, including Igor Shuvalov, Russia’s first deputy prime minister, have signalled the opposite.

Armenia, another former Soviet republic, was promised a 30 per cent gas price cut by Mr Putin this week after it ditched plans to sign an EU agreement and instead join the customs union.

For Mr Yanukovich, however, signing any agreement with Russia even short of joining the customs union would risk antagonising protesters.

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