UPDATE 2-Ukraine says Russian gas deal must be changed

Published 09/03/2010, 08:56 AM

* PM says will find a way to lower imported gas price

* Says will not "blackmail" Russia

* Previous dispute disrupted Gazrpom's supplies to Europe

(Adds context, background)

KIEV, Sept 3 (Reuters) - Ukrainian Prime Minister Mykola Azarov urged Russia on Friday to cut gas prices for its neighbour, saying their current deal was unacceptable and would not work for its full 10-year term.

Bringing memories of previous "gas wars" between the two ex-Soviet nations that disrupted supplies to Europe, Azarov said Ukraine would find a way to change the price even if Russia refused to do so -- but added, "We will never do blackmail".

A January 2009 agreement between Russian gas giant Gazprom and Ukraine state energy firm Naftogaz set a base formula for the price of Russian gas, which the Ukrainians say is onerous despite a discount agreed last April.

"We are in talks (with Russia), and we are saying that if our call is not heard, we will think of some other mechanisms but will not work for 10 years with this contract," Azarov told a briefing.

"The Russian side understands this, but the longer they keep it in place the more profitable it is for them."

But he quickly added that Ukraine, which also transits Russian gas to Europe, would not blackmail Russia in order to revise the deal.

Reacting to a similar statement by Azarov last month, Russian gas monopoly Gazprom said it could cut the gas price if Ukraine agreed to merge Naftogaz with Gazprom -- something Kiev is not keen to do.

President Viktor Yanukovich's administration has already secured a $100 discount on the price of 1,000 cubic metres of gas in exchange for allowing Russia to keep its Black Sea fleet in a Ukrainian port until 2042.

Under pressure from the International Monetary Fund, which last month opened a $15 billion credit line to Ukraine, the Azarov government has announced austerity measures including a 50 percent rise in the price of gas for households. (Reporting by Natalya Zinets; Writing by Olzhas Auyezov, editing by Jane Baird)

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