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Ukrainian Gov't Probes Russian Oil Cos.

Wed Apr 20

KIEV, Ukraine - Government regulators are investigating a group of Russian-owned oil companies for allegedly conspiring to raise the price of gasoline in Ukraine, officials said Wednesday.

The spike in gas prices during the spring sowing season threatens to push up agricultural prices, as farmers often pass along costs to consumers.

"In conditions when the prices on gas are increased and senior officials and the media claim there is an agreement between oil traders, the Anti-Monopoly Committee cannot stay out of this," said chairman Oleksiy Kostusyev.

The companies could be fined up to 10 percent of their 2004 revenues if found guilty of conspiracy.

Oil traders blame the increase on higher export tariffs from Russia as well as on the rising cost of train cargo shipments in Ukraine.

Prime Minister Yulia Tymoshenko dismissed those reasons, saying that the Russian companies' dominance of Ukraine's gas market was no longer welcome.

"The raising of prices is artificial," she told journalists Wednesday.

Tymoshenko said she would meet with TNK-BP and Lukoil representatives this week, and that she had dispatched investigators to Ukrainian refineries. She had threatened gas stations earlier with fines if they did not lower prices, and she said Thursday she expected the prices to soon come down.

The government also attempted to set a limit on prices, but so far gas stations have ignored them. The Ministry for European Integration and Economy ordered prices to be capped at under 3 hryvna (57 cents) a liter from April to June — at the height of the spring agricultural season.

Lukoil Ukraine's press office said the company was ready to meet with the government to discuss the situation, but insisted that the higher prices reflect rising world prices. The Ukrainian office of the Russian-British TNK-BP referred all questions to Moscow's headquarters, but spokesman Vladimir Bobylov said he didn't have any information.

The company temporarily suspended sales in Ukraine earlier this week, but has resumed them. It refused, however, to adhere to the government's order to cap prices.

Andriy Dmytrenko, an analyst with Ukraine's Dragon Capital investment house, predicted the oil giants would reach a compromise with the new government over prices — even if the government fails to prove a conspiracy.

"The government can warn them of some specific investigation, say a tax investigation and other disruptive measures, and I think they'll realize they have to reach some consensus," he said.

Russian companies dominate Ukraine's gasoline sector, a holdover from Soviet times when refineries were built in Ukraine because of the proximity to Europe.

After the 1991 Soviet collapse, Ukraine didn't have enough oil reserves to run the refineries, and so the newly independent nation turned to Russian investors.

BY MARA D. BELLABY