Kazakhstan resumes oil transit through Ukraine

KIEV, Ukraine, Sept. 14 (UPI) -- Kazakhstan has agreed to resume using Ukraine as a transit nation for its oil supplies to Europe, Ukrainian President Viktor Yanukovych said Wednesday.

Both nations agreed to boost the transit volumes to 8 million tons per year, Russia's state-run news agency RIA Novosti reports. Yanukovych announced the agreement after a meeting with Kazakh President Nursultan Nazarbayev Tuesday in Kiev.

"A certain portion of this amount could be transferred to Ukrainian oil refineries, which could be determined by a separate agreement," Yanukovych was quoted as saying by BSANNA News, a group of Central Asian news agencies.

Kazakhstan, a country rich in hydrocarbons, in late January halted oil transit through the Ukrainian section of the Druzhba oil pipeline following a dispute over transit prices. Kazakhstan instead sent oil through Belarus to Poland.

The row involved Kazakhstan's KazTransOil and the Ukrainian transport company Ukrtransnafta, which reportedly asked for its transit fees in euros instead of U.S. dollars, resulting in a de facto price hike of up to 25 percent, RIA Novosti writes.

While neither of the two leaders said what resulted in the shift of policies, the differences seems to have been settled.

"Oil shipments have resumed," Nazarbayev was quoted as saying by BSANNA News. "And we are talking about the increase in the transportation of oil, and in future the transportation of gas, as well as the participation of Ukrainian companies in the exploration of gas fields in Kazakhstan. This is reflected in our protocols, while ministries and agencies are conducting concrete work."

Yanukovych in April announced Ukraine's interest to buy Kazakh gas and to take part in developing oil and gas fields in Kazakhstan. Plans to build a joint liquefied natural gas station were abandoned earlier this month.

Ukraine is eager to restore the image of a reliable transit country after energy price rows with Russia temporarily halted supplies to Europe.

In the aftermath of the first gas conflict between Ukraine and Russia, two major Russian-European gas pipeline projects -- Nord Stream in Germany and South Stream in southeastern Europe -- were jump-started in a bid to bypass Ukraine and deliver Russian gas unilaterally to Europe.

Relations between Ukraine and Russia have since improved but Ukraine is also looking westward for increased energy cooperation.

After a meeting with European Commission Jose Manuel Barroso Monday in Brussels, Yanukovych vowed that gas price rows are a thing of the past. Barroso said the European Union was financing two feasibility studies for modernization of the Ukrainian gas grid.

The Soviet-era gas transit system transports 80 percent of the Russian natural gas bound for Europe but it's in dire need of reform.