09MOSCOW2874, PUTIN-TYMOSHENKO GAS AGREEMENT SHOULD HELP PREVENT

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Reference ID Created Released Classification Origin
09MOSCOW2874 2009-11-24 11:22 2011-08-30 01:44 CONFIDENTIAL Embassy Moscow

VZCZCXRO6921
PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
DE RUEHMO #2874/01 3281122
ZNY CCCCC ZZH
P 241122Z NOV 09
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 5488
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RHMFISS/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 002874 
 
SIPDIS 
 
DEPT FOR EUR/RUS, EEB/ESC/IEC GALLOGLY AND GREENSTEIN, 
S/EEE MORNINGSTAR 
DOE FOR HEGBURG, EKIMOFF 
DOC FOR JBROUGHER 
NSC FOR MMCFAUL 
 
E.O. 12958: DECL: 09/15/2019 
TAGS: EPET ENRG ECON PREL RS UP
SUBJECT: PUTIN-TYMOSHENKO GAS AGREEMENT SHOULD HELP PREVENT 
WINTER GAS CRISIS 
 
REF: A. MOSCOW 2277 
     B. MOSCOW 2834 
 
Classified By: Ambassador John R. Beyrle for Reasons 1.4 (b/d) 
 
------- 
Summary 
------- 
 
1. (C) PM Putin said in a joint November 20 press conference 
with PM Tymoshenko in Ukraine that Russia will not penalize 
Ukraine for having taken less gas than contracted.  He also 
confirmed that Gazprom and Ukraine will sign new contracts 
for 2010 that will call for lower Ukrainian purchase volumes 
and higher transit tariffs charged to Russia.  The Russian 
position on fines, volumes, and transit tariffs appears to 
indicate a Russian desire to avoid another conflict over gas 
this winter.  To many observers, including much of the 
Russian mass media, it also implies Moscow's support for 
Tymoshenko in the Ukrainian presidential election, a view 
echoed to us by the Ukrainian Embassy here.  Overall, it is a 
clear sign that the Kremlin and Gazprom appreciate that 
Russia simply cannot afford a repeat of last year's gas 
shut-off fiasco.   End summary. 
 
------------------------------ 
"NO SANCTIONS WILL BE APPLIED" 
------------------------------ 
 
2. (SBU) PM Putin announced in unusually clear terms during a 
joint November 20 press conference in Yalta with PM 
Tymoshenko that Russia would not fine Ukraine for having 
purchased far less gas than it was obligated to buy under its 
January 2009 contract.  "Let me repeat this publicly - no 
sanctions will be applied," he said in response to a question 
seeking clarity on the issue.  Putin thus appears to have 
eliminated what many observers saw as a primary potential 
cause of a future Russia-Ukraine gas crisis.  Furthermore, 
Putin told the gathered press that the 2010 gas contract 
would be adjusted to suit Ukraine's projected lower gas 
demand (again with no fines) and that Russia would pay 60% 
higher transit tariffs to Ukraine.  Ukraine, for its part, 
would no longer receive any discount from the price other 
European customers pay Gazprom. 
 
3. (C) Ivan Zolotov (protect), Gazprom's Director of Foreign 
Relations, told us that Putin's statement on the fines simply 
reflected a decision Gazprom already made and what he has 
been telling us (ref A) and others for the past several 
months: that the take-or-pay provision in the contract would 
not be enforced.  He also confirmed that the 2010 volumes in 
the contract will be lowered in line with Ukraine's demand 
and that transit tariffs will be raised.  He questioned, 
however, the 60% figure used by Putin, which had also been 
previously suggested by Tymoshenko.  He simply said that 
tariffs would "be in line with internationally accepted 
standards" and will be worked out by negotiators working on 
the contract.  Zolotov noted that the decision on foregoing 
fines and renegotiating the contract with Ukraine could set 
an unwelcome precedent that could support other European 
customers who are also seeking contract modifications. 
 
---------------------------- 
LOWER LIKELIHOOD OF CONFLICT 
---------------------------- 
 
4. (C) Most media stories and many analysts noted that the 
Putin-Tymoshenko agreement lowers the chances of repeating 
last year's gas crisis.  Zolotov also believes the agreements 
should help prevent a conflict -- "I will not be canceling my 
January vacation."  Ukrainian Embassy Economic Counselor 
Vladimir Zaritsky told us he agreed with this assessment.  He 
added that there also should not be any problems with 
payments for the gas Ukraine does consume, and that his 
Ministry of Economy has assured him that Ukraine is able to 
pay its gas bills. 
 
---------------------------- 
IS PUTIN BACKING TYMOSHENKO? 
---------------------------- 
 
MOSCOW 00002874  002 OF 002 
 
 
 
5. (C) Zaritsky said he personally believes that a main 
driver of Russia's seemingly forgiving position on the gas 
issue is Putin's support for Tymoshenko in the upcoming 
Ukrainian presidential elections.  Two Russian oil and gas 
analysts agreed with the view, telling us prior to the 
November 20 announcement that Putin's recent positive 
commentary following his meetings with Tymoshenko indicate he 
is backing her in the elections.  This position has also been 
adopted by the Russian mass media, which was quick to 
interpret the Putin-Tymoshenko gas agreement as a sign of 
Moscow's support for Tymoshenko.  Other observers took a more 
nuanced approach, with Public Chamber member Iosif Diskin 
stating on a Moscow TV channel (with a straight face) that 
Russia does not interfere in Ukraine's internal affairs. 

Tatyana Stanovaya on politcom.ru wrote that the Kremlin is 
ready to deal with any Ukrainian leader.  She saw Tymoshenko 
only as a "situational ally" in avoiding another gas war that 
could provoke Ukrainian President Yushchenko. 
 
6. (C) Ukraine's Ambassador to Moscow, Konstantin Hryshchenko 
agreed that the meeting in Yalta amounted to a political 
boost for Tymoshenko, since "there are enough fools in 
Ukraine" to be taken in by the Kremlin's effort to spin the 
story that way.  Hryshchenko (whose political ties are to 
Yushchenko) complained to Ambassador Beyrle November 23 that 
the bulk of the meeting between Putin and Tymoshenko was 
(again) one-on-one, and thus the long-term tradeoffs for 
Russia's more accommodating position on penalties would 
remain unclear.  "We will have to pay for this, obviously, 
but when and how much, nobody knows." 
 
------- 
COMMENT 
------- 
 
7. (C) The agreement, coupled with the positive tone struck 
by Putin in the press conference and the "early warning" 
agreement reached between Russia and the EU (ref B), should 
indeed help prevent another conflict over gas this winter. 
It is worth noting that many details of a future contract 
still have to be worked out, leaving room for future 
tensions.  Putin and Tymoshenko may have simply punted the 
potentially divisive negotiations over contract details to 
the post-election period.  Ukraine seems to have benefited 
from a confluence of factors that make a gas war detrimental 
to Russia.  First, another gas crisis would be damaging to 
Gazprom's already troubled finances and reputation.  Second, 
the Russian economy is just emerging from recession and the 
GOR cannot afford to spook cautious foreign investors looking 
to return.  Finally, Russia has an almost existential 
interest in the outcome of the Ukrainian presidential 
election and will do all it can to ensure that whoever 
benefits from the perception that Russia is making 
concessions to Ukraine, it is not Viktor Yushchenko. 
Beyrle

Wikileaks

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