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Russia, Kazakhstan May Cancel Oil Export Duties within CIS Free Trade Zone

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KIEV (RIA Novosti) – Ukrainian Prime Minister Mykola Azarov has said Russia and Kazakhstan have agreed to cancel oil export duties for participants in a free trade zone being created within the Commonwealth of Independent States (CIS).

Ukrainian Prime Minister Mykola Azarov

“For the first time, we fixed in the agreement the readiness of Russia, as well as Kazakhstan, another oil producing country, to cancel [oil] export duties within a limited period,” Azarov said in an interview with Ukraine’s Inter TV channel on Saturday.

Russian Deputy Finance Minister Sergei Shatalov said on Thursday Russia could cancel its oil export duties no earlier than 2020.

On Tuesday, the majority of the CIS countries signed an agreement to set up a free trade regime after two decades of debate. The CIS consists of Azerbaijan, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan and Uzbekistan. Ukraine has not ratified the CIS Charter but participates in its activities. Turkmenistan, Azerbaijan and Uzbekistan are yet to decide whether to join the agreement.

Azarov said on Thursday the agreement may come into force in January 2012. It is yet to be ratified by member states.

In the interview with Inter, the Ukrainian premier said Russia’s high oil export duties were detrimental to Ukraine’s oil refineries.

“Oil export duties of $450 per ton ($64 per barrel) make our oil refineries unprofitable,” he said. He also said he expected a new agreement on Russian gas supplies to Ukraine being negotiated by the sides to correspond to Ukraine’s ‘long-term interests”. “We are certainly ready to compromise – and we will – because we don’t have other options,” he said.

In August, following a gas pricing row between Moscow and Kiev, Ukrainian state energy monopoly Naftogaz threatened to cut its gas imports from Russia if Moscow does not agree to lower the price.

Earlier this month, Former Ukrainian Prime Minister Yulia Tymoshenko was sentenced to seven years in jail on charges of abusing her power in the signing of a 2009 gas deal with Russia that Ukraine seeks to review. She has already appealed the verdict.

“The first thing that Russia needs is guarantees of uninterrupted gas supplies to Europe,”Azarov said. “We are trying to persuade our partners that we are ready to guarantee the reliability and stability of gas supplies by concluding the agreement.”

Russia annually pumps about 100 billion m³ of gas to European countries via Ukraine, which makes up 80% of its total gas supplies to Europe.

Russian gas exports to Europe via Ukraine have been disrupted several times in recent years over pricing rows with Kiev. In early 2009, Europe has been left without Russian gas for nearly two weeks after Russian energy giant Gazprom and Ukrainian state energy monopoly Naftogaz failed to agree on gas prices.

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