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Last Updated: Wednesday, 28 December 2005, 13:58 GMT
Ukraine ups ante over Russian gas
Gas pipeline
Four-fifths of Russia's gas passes through Ukraine
Ukraine has warned Russia that it may seek international arbitration over their worsening row over gas prices.

Prime Minister Yuri Yekhanurov said it could refer the case to the Stockholm Arbitration Institute unless an acceptable compromise was reached.

Russia's Gazprom wants Ukraine to pay four times more for its gas imports and has threatened to cut off supplies if terms are not agreed by 1 January.

Ukraine's energy minister is in Moscow on Wednesday to try and defuse the row.

'Unacceptable demands'

Ivan Plachkov's visit was agreed by Russian President Vladimir Putin and Viktor Yushchenko, his Ukrainian counterpart, on Tuesday.

Russia has said it will not put forward any new proposals, continuing to demand that Ukraine pays market rates for the gas from its state-owned Gazprom.

Ukraine has insisted that Russian proposals - which would see the cost of importing Russian gas quadruple to between $220 and $230 per 1,000 cubic metres - are unacceptable.

Ukraine says it is happy to pay market rates, but wants price increases to be phased in gradually over several years.

Ivan Plachkov, Ukraine's Energy Minister
Ivan Plachkov is hoping to defuse tensions during his Moscow visit

It has argued that Belarus, a close ally of Russia, will pay just $46 per 1,000 cubic metres for gas after a recent agreement, while both Georgia and Armenia are also paying less.

"Ukraine's proposals to resolve the situation in a civilised manner have been sent," Mr Yekhanurov said.

"We hope Gazprom will give answers to the Ukrainian side's proposals. Should the Russian side refuse...we have grounds to appeal to the Stockholm court."

Legally binding

Since the 1970s, the Stockholm Institute has become an established body for settling commercial disputes between countries of the former Soviet Union and other nations.

Both Russia and the Ukraine are signatories to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, so any would-be decision by the Institute in the case would be legally binding.

Relations between the two countries have been tense since the election of the pro-Western Mr Yushchenko in 2004.

Gazprom has dismissed a claim by Ukraine that it is legally entitled to take 15% of Russian gas which is piped across Ukraine on route for western Europe.

Such a course of action would be regarded as theft, the company said.

"Russia has already made all its proposals... and there will be no other proposals from Russia," Industry and Energy Minister Viktor Khristenko said on Tuesday.

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