Kiev (Platts)--26Nov2012/734 am EST/1234 GMT

Ukraine will further cut imports of Russian natural gas next year after recent negotiations in Moscow have failed to lower gas prices, President Viktor Yanukovych said.

Ukraine will cut gas imports from Russia to 18 billion cubic meters in 2013 from 20 billion cu m earlier planned, Yanukovych said.

"There is only one leverage we can use to influence the situation," Yanukovych said in comments released by his press service over the weekend. "It is further reducing the imports of Russian gas."

It is the second time in the past 10 days that Ukraine has significantly lowered its forecast for Russian gas imports next year, highlighting the problems in gas price negotiations.

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Ukraine imported 40 Bcm of Russian gas in 2011, and has recently lowered its forecast of gas imports to 26 Bcm in 2012, down from 27 Bcm earlier planned.

The announcement comes days after Prime Minister Mykola Azarov held gas price talks in Moscow with his Russian counterpart Dmitry Medvedev at which he later said little progress had been made.

Ukraine has for more than two years been unsuccessfully trying to persuade Russia to lower natural gas prices to $250 per 1,000 cu m from about $432/1,000 cu m currently.

In response, Ukraine has decided to sharply cut gas imports from Russia while at the same time seeking to diversify its energy imports.

Earlier this month, Ukraine began importing natural gas from Germany through existing natural gas pipelines via Poland. The imports, supplied by RWE, are supposed to rise to at least 5 Bcm in 2013, according to government officials.

QATAR TALKS

Further highlighting disagreements with Russia, Yanukovych left on Sunday for a visit to the Middle East, including to the United Arab Emirates and Qatar.

The visit, which will end in Qatar on Wednesday, is expected to increase cooperation in the energy sector as Qatar is expected within three years to become a major supplier of liquefied natural gas to Ukraine.

"Without any doubts the visit to Qatar will boost mutual cooperation in trade, economic, energy and other sectors," Andriy Honcharuk, head of the foreign department at the Yanukovych administration, said.

Energy and Coal Industry Minister Yuriy Boyko said earlier this month that Ukraine in three years will be importing natural gas from three sources, including Russia, Germany and Qatar -- taking 5-7 Bcm/year from each.

NO CUSTOMS UNION

Yanukovych's remarks also show that Ukraine has rejected Russia's recent proposal to join the Customs Union, a Moscow-led trade bloc that includes Russia, Belarus and Kazakhstan.

Joining the Customs Union would derail Ukraine's European integration and place the country firmly into Moscow's orbit for years to come.

Trying to lure Ukraine to join the alliance, Moscow suggested that Kiev will be able to buy natural gas at $160/1,000 cu m after joining the Customs Union, according to Azarov.

Medvedev and Azarov discussed the Customs Union at their talks in Moscow last week.

Yanukovych said earlier that Ukraine may increase cooperation with Russia, Belarus and Kazakhstan without joining the Customs Union, calling such cooperation the "three plus one" formula.

But Moscow rejected the formula, insisting on Ukraine's full membership.

--Alexander Bor, newsdesk@platts.com
--Edited by Jeremy Lovell, jeremy_lovell@platts.com

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