Russians change tune on energy merger – Ukranians heave sigh of relief

Russain President Dmitry Medvedev appeared to rule out a  merger deal between Russian gas giant Gazprom and Ukraine’s national energy company, Naftogaz

The energy merger, was suggested by Russian Prime Minister Vladimir Putin at a news conference after talks with the Ukrainian prime minister, Mykola Azarov, in the Russian resort city of Sochi on Apri 3oth.

On the eve of a two-day visit to Kiev that starts on Monday, Medvedev conceded that the merger proposal was not accepted by the Ukrainian side. Medvedev said: “We are not talking about just a merger,” but also of “joint ventures” and other “partnerships” similar to those that exist between Gazprom and European energy companies.

Ukraine's  president, Viktor F. Yanukovich,  whose election platform featured closer ties to Moscow, negotiated with Moscow to extend the lease on a Russian naval base on the Crimean Peninsula for 25 years.  Russia, in return, agreed to cut the price of its natural gas by 30 percent — at a cost to Russia of at least $30 billion,  A vote on the issue in the Ukrainian Parliament deteriorated into a melee.

Mr Yanukovich , who has also pledged to preserve Kiev’s European Union membership ambitions while steering Kiev on a balanced path between west and east, sent clear signals late last week that there were limits reviving friendly relations with Russia.

On Friday, he balked at Mr. Putin's impromptu proposal, saying that Kiev would only accept a merger between Gazprom and Naftogaz if it was “50/50.” Made in joking fashion, the counteroffer by Mr Yanukovich was seen as a de facto refusal of the Russian offer.

Asked during a televised interview with Ukrainian journalists about Mr Yanukovich’s position, the Russian president said: “I am not hurt by the refusal, because I haven’t discussed the issue with President Yanukovich yet.”

Russia is heavily dependent on Ukrainian pipelines, which carry about 80 percent of its natural gas exports to Europe, and it has long coveted a greater degree of control over them. If the deal were to go through, Gazprom would effectively swallow the much smaller and heavily indebted Ukrainian company.

Source:  The Financial Times