Russian government and
the Gazprom espoused two critical tactics to deal with the Ukrainian trade, In
the late 1990s. Firstly, it encouraged Turkmenistan, the second-largest
Commonwealth of Independent States producer, to sell gas to Ukraine and allow
Russian volumes for Europe. Secondly, it utilized a series of negotiation for
trading companies “Itera from 1998, Eural Trans Gas from 2003,
Rosukrenergo (RUE) from 2005” to transport, as well as sometimes to
supply, the gas to Ukraine. Rosukrenergo, which is owned fifty (50) percent by
Gazprom heretofore by Gazprombank, 45 percent by Dmitry Firtash the Ukrainian
businessman as well as 5 percent by Ivan Fursin, proceeded as the shipper of
gas to Ukraine just before the end of 2008 (Pirani, S, 2009).The utilization of
negotiation was long condemned in European government circles as well as by
corporate governance bodies where there was responsibility about their murkiness,
and by different Ukrainian politicians who criticize the excessive profits as
well as corporate power confer on the intermediary owners (Witness, G. 2006).

NEGOTIATIONS AND
COMMENTARY BETWEEN RUSSO-UKRAINE

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From its first days in
power, the new Ukrainian government called on Russia to make a fresh
renegotiation in gas relations and, in specific, to begin the agreement on
price reduction. Ukraine determination proclaimed by a number of noteworthy
talks in Moscow in March and April. While it is realized that Ukraine longing
for decrease import prices to $250-260/mcm, it is not certain whether it was
requesting rectification of the formula, or for a transition amid during which
it would receive a reduction in cost from the contractual cost. In our view Ukraine
could have been soliciting for: reduction from the base price which, even
though widely anticipated as too high, is still within the scope of prices paid
by European nations which would consequently bring about lower costs during the
entire term of the agreement until 2020, or potentially a gas price discount
determined on the premise of the existing formula for a transitional span as
was the case with Belarus and Moldova when the two nations secured a transition
period of four years until 2011 (Stern, J. 2010).

In spite of the flurry of
negotiating activity, progress originally remained restricted. However, toward
the beginning of April, Russian president Putin consented
in principle to the bargaining of a price reduction. In the meantime, he
focused on that Gazprom was happy with the 2009 contracts, and consequently,
these were to remain the main reason for Russia-Ukraine gas relations, as well
as if any compromise were to be made on value, Ukraine would need to concoct compensatory
offers worthy to Russia and Gazprom. Thusly, Gazprom CEO Aleksei Miller focused
on that a price reduction would be subject on the volumes have taken by
Ukraine, while taking note of that, Ukraine had officially taken less gas in 1Q
2010 than was imagined by the agreement. Ukrainian prime minister Azarov
reacted that Ukraine will take only as much gas as it needs (Stern, J. 2010).

However, Gazprom and
Naftogaz on 9 April agreed that Naftogaz will buy 36.5 bcm in 2010 rather than
33.7 bcm as beforehand envisaged in the agreement, however, Gazprom agreed
Naftogaz offstage in the beginning of a quarter was in fact, in accordance with
the deal. Even though no official articulation was made by either side,
however, on 16 April it was stated that Gazprom agreed to lessen import costs
for Ukraine in return for the utilization of several of Naftogaz?s storage
facilities. It was also announced that an offer had been made to rent the storage
facilities to Gazprom, which would have been a noteworthy business concession
by Naftogaz. Neither the size of discount offered in return and not any details
of the storage plans were uncovered by the parties to the discussions (Stern,
J. 2010).

 Besides, on the following day, Russian deputy
prime minister Sechin noted that the problem with the price decrease was still
being discussed. It later becomes known that negotiations continued in Putin’s
residence late into the evening of 20 April 2010. The following day, in
Kharkov, the intergovernmental accord between presidents Yanukovich as well as
Medvedev on the 25-year prolongation of the Black Sea Fleet rent, and also, the
contractual appendix providing for the 30% price decrease were signed (Stern,
J. 2010).

GAZPROM AND RUSSIAN
GOVERNMENT POSITION

It is regularly asked
whether if there are any dissimilarity between the perspective of Gazprom as
well as the Putin administration. Since the Putin administration has a
controlling concern in the company, however, directly or indirectly, it
appoints as well as approves all major personnel appointments, some have an
opinion that Gazprom serves as an economic as well as political arm of the
government. This dispute showed that Gazprom and the Putin administration working
together, more so, with the company taking its crucial direction from the
Russian president Putin, likely with the tacit accord of President Medvedev who
only sporadically issued articulations. In this manner, while President Putin
was in charge of Russian decision-making during the crisis in January 2006,
Putin was also clearly in control in January 2009 (Pravda report, 2009).