From left to right: president of LUKOIL Vagit Alekperov, Prime Minister of Ukraine and leader of the Party of Regions of Ukraine Viktor Yanukovich, and president of Group Alfns Musa Badaev during a meeting, August 21, 2006
Photo: Alexander Techinsky
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Ukraine Imposes Controls on Fuel Prices
Top management and owners of all oil companies active in Ukraine met with Ukrainian Prime Minister Viktor Yanukovich yesterday. They talked about new rules for the fuel market and signed a cooperation agreement saying that the government will be able to impose controls on fuel prices in exchange for creating more favorable conditions for domestic oil refining. About 60 percent of the Ukrainian fuel market is supplied by the Lisichansky refinery (which belongs to TNK-BP) and Ukrtatnaft (a joint enterprise with Tatneft). Analysts note that the agreement may serve as a model for relations between the state and all sectors of industry.
The agreement consists of two parts – the obligations of the state and those of the oil companies. The state is obliged to form an analytical group that will regularly meet with oil industry representatives to discuss the normative acts of the government to regulate the market. The authorities also promise to create conditions for the expansion of oil refining and curtail imports of fuel, return VAT promptly to exporters of petroleum products, lower the cost of rail transit of petroleum products and introduce Euro-4 fuel standards by 2010. The oilmen promise to reconstruct refineries, to reject punitive agreements and guarantee that prices correspond to world market conditions.
The Ukrainian cabinet of ministers is now able to regulate prices for fuel without using so-called antipopular measures. Former prime minister Yulia Timoshenko's attempt at fuel price regulation last year led to a prolonged serious fuel crisis, the consequences of which are being felt to this day. Now the oil companies will be in meetings with Deputy Prime Minister Andrey Klyuev and Minister of Fuel and Energy Yury Boiko every month to discuss the price situation on the petroleum product market. If prices are high, an agreement will be reached on the maximum level.
“If the present cabinet tried to force the oilmen to hold to restricted prices, they would immediately accuse it of antipopular measures,” Mikhail Volynets, member of the Supreme Rada Committee on Heating and Electricity, commented to Kommersant, “so the cabinet compromised. In exchange for the possibility of discussing pricing, the cabinet has resorted to protectionist measures to support Ukrainian refining. Specifically, duties will be imposed at the beginning of next month on imported petroleum products and benefits will be provided on the acquisition and import of refinery equipment. Oil industry representatives are satisfied with the agreement in general, but note that its specific mechanisms have yet to be developed.
www.kommersant.com
All the Article in Russian as of Aug. 22, 2006
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