Gas deal in doubt after Ukraine parliament dismisses government

London (Platts)--10Jan2006

The Ukrainian parliament Tuesday dismissed the government of Prime
Minister Yuri Yekhanurov, plunging into uncertainty the week-old
agreement that was thought to have ended the country's bitter dispute
over Russian gas import prices, Ukrainian sources told Platts.

     Grygoriy Nemyria, foreign policy adviser to former Ukrainian Prime
Minister Prime Minister Yulia Timoshenko, told Platts that while the
agreement carried with it "the illusion of resolution," in practice its
future remained doubtful because of lack of transparency.

     Nemyria said 250 members of parliament voted for the resolution to
dismiss the cabinet in protest against the Jan 4 agreement under which
Ukraine's Naftogaz state gas company agreed to purchase gas from Russia and
Central Asia at an average price of $95 per thousand cubic meters in 2006,
although the price of gas from Russia would more than quadruple to $230/tcm.

     About 50 members of parliament were believed to have voted against the
resolution.

     Nemyria said the government was expected to continue in office in a
caretaker capacity until parliamentary elections on March 26. However,
although this was the immediate political consensus, he noted there were legal
obstacles to be overcome as caretaker governments are supposed to stay in
office no longer than 60 days, which would mean its authority would expire on
March 12, two weeks before polling day.

     "The impact on the gas deal depends on what course the government
pursues," Nemyria said.

     Yekhanurov said Tuesday morning before the vote he was intending to
follow up the commercial deal struck between Naftogaz and Russia's Gazprom
with an inter-governmental agreement between Ukraine and Russia. If this is
still the plan, Nemyria said, "the negotiating position of the Ukrainian
cabinet of ministers would become much weaker, because of today's vote."

     Alternatively, Nemyria argued, there is a chance that Ukraine's courts
may seek to annul the Jan 4 agreement. Nemyria said several groups were filing
legal suits intended to force Naftogaz chief Oleksiy Ivchenko to face criminal
charges in connection with the deal.

     These were based on the argument, Nemyria said, "that he abused his power
and was not in capacity to sign this agreement." If so, Nemyria added, "the
court could invalidate this agreement -- that is still, a very possible thing
to happen."

     In which case, Nemyria argued, "that would return us to the status quo,
the situation up to Jan 3 with a fixed price of gas at $50 per tcm to Jan 1,
2010."
 
		--John Roberts, john_roberts@platts.com

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