RusEnergy

September 6, 2006 - The Moscow News - By Valeria Korchagina - Miller and Niyazov meeting in Ashgabat on Tuesday. Niyazov demanded $100 per 1,000 cubic meters of gas in June. Gazprom on Tuesday said it had struck a three-year deal with Turkmenistan to buy its gas for $100 per 1,000 cubic meters -- a 50 percent hike on the current price of $65. The cost will most likely be passed on to Ukraine, the final customer for Turkmen gas, when the price increase takes effect in January. Under the deal, reached by Gazprom CEO Alexei Miller and Turkmen President Saparmurat Niyazov during talks in the Turkmen capital, Ashgabat, on Tuesday, the country's gas sales to Russia will drop to 50 billion cubic meters per year. Under a 2003 agreement, Turkmenistan was to sell Russia 80 bcm per year until 2009. Tuesday's talks were the latest in a series between the two men in Ashgabat since Niyazov in June threatened to cut off supplies unless Russia agreed to pay the $100 price. Niyazov also agreed Tuesday to send an extra 12 bcm of gas this year to help Ukraine prepare for the winter and secure Russian gas supplies to Europe. In January, Russia cut off supplies to Ukraine after demanding a fourfold gas price hike. The dispute was resolved when Ukraine agreed to increase the price it paid from $50 to $95 per 1,000 cubic meters. The reduced supplies of Turkmen gas from 2007 to 2009 will mean that Gazprom and other Russian producers will have to work harder to boost domestic gas output, analysts said Tuesday. Previously, Gazprom had hoped that Turkmen gas would fill gaps in the domestic market and help to buy it time to develop remote fields in northern Russia. Niyazov, one of the most authoritarian and erratic leaders in the former Soviet Union, insisted Tuesday that Turkmenistan would stick to the new deal. "First and foremost, we will supply gas to Russia. Don't think that Turkmenistan wants to go elsewhere with its gas," Niyazov said, Interfax reported. Gas exports to Ukraine via Russia are the main source of income for impoverished Turkmenistan, which only has limited export options. Niyazov has threatened to shut off supplies many times before, and has carried out his threat on a few occasions. The last time was in 2005, when supplies were cut off for a few months. In the 1990s, a price spat with Russia prompted Niyazov to cut off gas for 2 1/2 years while he sought a better deal. The new Turkmen price will almost certainly mean that Ukraine will have to pay at least $135 per 1,000 cubic meters of gas from January, said Valery Nesterov, oil and gas analyst with Troika Dialog investment bank. "For Ukraine, these are expected changes," Nesterov said.