NEW RUSSIA-UKRAINE GAS AGREEMENT FACING OBSTACLES

NEW RUSSIA-UKRAINE GAS AGREEMENT FACING OBSTACLES

A new agreement between Russian President Boris Yeltsin and President Leonid Kuchma of Ukraine may allow vast quantities of gas to flow from Turkmenistan, but prospects are clouded by Moscow's history of demanding enormous profit and power.

At a meeting Saturday near Moscow, the two presidents addressed a series of troublesome issues that have divided the two nations. Mr. Kuchma declared the problem of renewing Turkmen gas deliveries through Russian pipelines solved, but he gave no details, Reuters and Interfax said.Last week, Mr. Kuchma also shuttled to a meeting with Turkmenistan's president, Saparmurad Niyazov, in search of the elusive trilateral deal. Turkmenistan agreed to sell Ukraine 20 billion cubic meters of gas per year (1.9 billion cubic feet per day) until 2005.

IT'S ALWAYS PRICE

The big question is price. Russia can essentially set it by either playing the middleman or charging transit fees. Turkmenistan halted gas exports last March after Moscow diverted all its supplies to poorer republics like Ukraine which failed to pay. Kiev has since restructured its debt, making Turkmenistan willing to start deliveries again.

But an analysis last week suggests that Moscow's markups have been so huge that it is likely to benefit far more than Turkmenistan. Last month, a mission by Russian Prime Minister Victor Chernormyrdin to isolated Turkmenistan failed to produce an expected export deal because of haggling over price.

While Russia's Gazprom said it was willing to buy 30 billion cubic meters of gas for delivery this year, it offered only $32 per 1,000 cubic meters while Turkmenistan wants $42. Reports suggest that Russia may have gone as high as $36. But the Jamestown Foundation's Monitor said the difference is small compared with Russian profit on the deal.

CIRCUITOUS ROUTE

Russia charges Ukraine $80, the Monitor quotes Mr. Niyazov as saying. To justify its demands, Moscow plans to ship the gas over a circuitous 930-mile route instead of by a 370-mile line, charging for the distance. On top of that, Russia's per-mile fees are about 50 percent more than the rate it has been paying Ukraine for allowing gas transit to Europe across its territory.

According to other reports, Russia plans to charge Turkey $105 per 1,000 cubic meters as part of its deal to boost deliveries fivefold by 2010. Turkmenistan has reached its own preliminary deal to supply Turkey, but the gas would have to go through Iran over a line that has yet to be built.

Russia's profit potential on Turkmen gas is enormous, presumably leaving it plenty of room to negotiate. Meanwhile, Turkmenistan's economy is in desperate straits because of the gas cutoff last year. The country's gas exports were valued at only $294 million, while gross domestic product fell some 20 percent.

If they materialize, Turkmenistan's planned exports through Russia this year would bring the republic about $1 billion in revenue. Moscow would gross some $2.4 billion.

Power politics is also a big factor. The Monitor hints that Ukraine could press for higher transit fees from Russia to Europe if it fails to grant the same rates to Turkmenistan. But that kind of threat is unlikely to be accepted by Moscow. Although Ukraine has a history of diverting supplies bound for Europe, it must still get all of its gas from Russia somehow.

4TH-LARGEST GAS RESERVE

Statements by Gazprom's chairman, Rem Vyakhirev, indicate that Russia is worried by tiny Turkmenistan's competition for the European market. Despite their disparity in size, the remote republic may have the fourth-largest gas reserves in the world.

Mr. Vyakhirev said last month he was not ''scared'' by Turkmenistan's attempts to ''squeeze'' Gazprom out of the European market, Bridge News said. So far, Russia has been doing all the squeezing, and no Turkmen gas has been getting through.