Today, Prime Minister Yulia Tymoshenko, in response to President Viktor Yushchenko’s appeal regarding the situation in the gas sector, published a letter to the head of state in the mass media.

The full text of the letter is below.

Dear Viktor Andriyovych!

In response to your letter to the government dated March 4, 2008, demanding the immediate resumption of talks between NJSC Naftogaz of Ukraine and the Russian company Gazprom, and the normalization of relations in the gas sector, I inform you that theses talks haven’t been suspended even for a day since the start of February 2008.

Thanks to the government’s efforts, gas supplies to Ukraine were fully resumed on March 5, 2008.

In addition, I believe it’s my obligation to inform you that as a result of the efforts of the previous government and its affiliated business structures, which parasitized on Ukraine’s national interests, the Ukrainian gas market is basically ruined. The National Joint Stock Company Naftogaz of Ukraine has been deliberately brought to near bankruptcy. There is no gas balance. As of the end of 2007, not a single contract was signed for gas supply to Ukraine. The entire sector is corrupted by intermediaries that worked on the Ukrainian gas market and today are trying to remain there.

At the same time, today, thanks to the work of the government and the new leadership of NJSC Naftogaz of Ukraine, we were able to save the National Joint Stock Company from ruin, by normalizing the management of the sector to convince our Russian partners of the need to take the gas market out of the shadow. The Ukrainian Prosecutor General Office’s has begun an investigation into the large-scale abuse by the former leadership of NJSC Naftogaz of Ukraine.

The government is controlling the situation and is responsible for securing gas for the population and the country’s industry, and uninterruptible delivery of Russian gas to Europe through Ukraine. I’m convinced that in a few days we will be able to reach an agreement with our Russian partners on concluding contracts and mutual payments, eliminating shady intermediaries, and avoiding incidents and misunderstandings in the future.

I, as Prime Minister of Ukraine, completely agree with you and support your determination to normalize the situation on the Ukrainian gas market and rule out any misunderstandings. I also support and will fulfill the agreements reached between the presidents of Ukraine and the Russian Federation on February 12 related to the prompt normalizing of relations between our countries in the gas sector.

However, the Cabinet of Ministers can’t agree to several of the conditions of these agreements, specifically:

Purchasing Russian natural gas in the first quarter 2008 at a price of US$315.6 per 1,000 cubic meters with payment in advance;

Replacing one intermediary with another by creating joint ventures (JV-2) for the supply of all imported and domestic gas on Ukraine’s internal market;

Pushing aside NJSC Naftogaz of Ukraine from the chance to balance and distribute gas on the Ukrainian internal market by concluding agreements for gas supply between JV-1 (gas importer) and JV-2.

It is the conviction of the government, the leadership of NJSC Naftogaz of Ukraine, and independent experts that satisfying these conditions will result in the preservation of corrupt schemes and abuse, the bankruptcy of NJSC Naftogaz of Ukraine, and will go against our national interests.

In view of this, the government proposes a number of additional measures that will allow us to defend Ukraine’s interests, eliminate grounds for corruption on the gas market and take into consideration the logical, transparent and legal interest’s of the Russian Gazprom.

The government has commissioned NJSC Naftogaz of Ukraine to hold talks on concluding direct contracts on gas supply with Gazprom Export without the creation of any additional joint ventures. NJSC Naftogaz of Ukraine is ready to independently supply gas on the Ukrainian internal market without any intermediaries.

Dear Viktor Andriyovych!

The government is controlling the situation on the Ukrainian gas market and is capable of fully guaranteeing Ukraine’s energy security and defending its economic sovereignty.

I’m convinced that we will solve all the problems with gas supply if Ukraine’s higher leadership holds one consolidated position on the international level that is based solely on defending Ukraine’s national interests.

6 March 2008

Prime Minister of Ukraine

Yulia TYMOSHENKO