UA-RU natural gas talks; banks in Dec-11; steel output in 2012; IUD, DTEK news; banks\' liquidity update

The temperature of talks between Ukraine and Russia authorities over the disputed nature of their cooperation in the natural gas sphere rose again yesterday as the sides exercised a hash exchange of statements via the national media.

Yet, before the New Year holiday season, the two sides appeared to be at a standstill in their marathon-like talks that have lasted for nearly a year. Then, on New Year\'s eve, Ukraine Minister of Energy Yuriy Boyko said that Ukraine would buy in 2012 a total of 27bn cubic metres of natural gas, down from more than 40bn imported in 2011. Russia\'s response to this affirmation was vivid, as Gazprom Chairman Alexey Miller interpreted Mr Boyko\'s pitch as begging for the US$9bn discount to the annual price tag for the volume of natural gas Ukraine is obliged to buy every year (which currently stands at 40bn m3).

Yesterday, the exchange of tough-language statements sprang up as an extension to the above-mentioned comment made on the New Year\'s eve. This could even hint that the sides have decided to build up ammunition to prepare for their widely announced next round of talks in mid-January. In particular, Mr Boyko yesterday reinstated Ukraine\'s government\'s intention to lower natural gas imports to 27bn m3. Miller\'s response was televised in a theatre-like scene yesterday, in which he was briefing lame-duck-president Dmitry Medvedev on Ukraine\'s untoward approach on New Year\'s eve. Some have drawn the conclusion from that meeting that Russia would use a penalty clause from the current Ukraine-Russia agreement on natural gas in order to bring Ukraine\'s side back into proper legal procedure.

This really makes the background for the upcoming meeting challenging, and the added prospect that they would yield no immediate resolution.
Read full comment in the attachment (13 pages, PDF file 1151KB)