Ukraine and Russia on Thursday began formal negotiations on amending the 10-year natural gas supply agreement signed in 2009 in response to Ukraine's persistent demands for lower prices.
Ukrainian Energy and Coal Industry Minister Yuriy Boyko traveled to Moscow for a meeting with Gazprom CEO Alexei Miller to begin the talks, Boyko's ministry said.
The talks are a breakthrough because Russia has been refusing to discuss the issue for the past 12 months.
The development comes days after Russian President Dmitry Medvedev and his Ukrainian counterpart Viktor Yanukovych, at a meeting in Kiev on April 26, agreed to look into the issue.
The ministry did not report on the progress of the talks, and said Boyko and Miller will hold the next round in mid-May.
Ukraine has been seeking to change the pricing formula in the 2009 agreement.
Ukraine paid $264 for 1,000 cubic meters of gas in the first quarter, compared with $253/1,000 cu m in the fourth quarter of 2010.
The price includes a $100/1,000 cu m discount that had been set by a separate agreement signed a year ago that allows Russia to extend the stationing of its naval fleet in Sevastopol by 25 years through 2042. EXTREMELY UNFAIR
Ukrainian Prime Minister Mykola Azarov, who had repeatedly said the 2009 agreement was extremely unfair to Ukraine, said recently the fair gas prices would be $200/1,000 cu m.
Ukraine has been seeking to change the way the price has been calculated by tying its price to the price paid by Germany, according to a person familiar with the situation.
The idea is to take the German gas price as the base, and to deduct the cost of transit -- because Ukraine is closer to Russia -- and also to deduct the $100 for the fleet-for-gas agreement in April 2010, the person said. Ukraine has been also seeking to include some other seasonal and volume discounts, the person said, without elaborating.
Ukraine's national energy company Naftogaz Ukrayiny paid more than $1.25 billion to Gazprom for natural gas imported in March, the company said in a statement Thursday.
Naftogaz said it paid about $1.6 billion to Gazprom in March and $1.4 billion in February.
Ukraine planned to import 40 Bcm of gas from Russia in 2011, up from 36.5 Bcm in 2010, according to Naftogaz.
