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The agreement between the Government of the Russian Federation and the Cabinet of Ministers of Ukraine on measures for providing strategic cooperation in the gas industry

of August 18, 2004

The government of the Russian Federation and the Cabinet of Ministers of Ukraine, further jointly referred to as - the Parties, and separately the sootvetstvennorossiysky Party and the Ukrainian Side, for the purpose of practical realization of intention of the Parties to increase amounts of transit of natural gas to the states of Europe and ensuring stable, effective and safe functioning and development of unified gas supply system of the Russian Federation and gas-transport system of Ukraine, being guided by the Statement of the President of the Russian Federation and the President of Ukraine for strategic cooperation in the gas sphere of June 9, 2002,

based on regulations of the Contract between the Russian Federation and Ukraine on economic cooperation for 1998 - 2007 of February 27, 1998, Agreements between the Government of the Russian Federation and the Cabinet of Ministers of Ukraine on encouragement and mutual protection of investments of November 27, 1998, Agreements between the Government of the Russian Federation and the Government of Ukraine on export of the Russian natural gas to Ukraine and its transit through the territory of Ukraine to the European countries of February 18, 1994, Agreements between the Government of the Russian Federation and the Cabinet of Ministers of Ukraine on guarantees of transit of the Russian natural gas on the territory of Ukraine of December 22, 2000, Agreements between the Government of the Russian Federation and the Cabinet of Ministers of Ukraine on additional measures for ensuring transit of the Russian natural gas on the territory of Ukraine of October 4, 2001, Agreements between the Government of the Russian Federation and the Cabinet of Ministers of Ukraine on strategic cooperation in the gas industry of October 7, 2002,

agreed as follows:

Article 1

The joint investment project within strategic cooperation and creation of the international consortium on management of gas-transport system of Ukraine is the construction project and further operation of the gas pipeline of Bogorodchana - Uzhhorod (далееГазопровод).

Article 2

Realization of construction and the subsequent operation of the Gas pipeline is performed by the subject of managing of Ukraine - "International Consortium for Managing and Developing Ukraine's Gas Transmission System" limited liability company (further - Consortium) which is created by JSC Gazprom, the Russian Federation, and NAK Naftogaz Ukrainy, Ukraine (further - Authorized organizations of the Parties).

The parties agreed that exit of Authorized organizations from the list of members of Consortium is possible only in case of the consent of the Parties. The parties will provide realization of the specified provision by participation in governing bodies of Authorized organizations.

Article 3

The Russian side during the term of this agreement through JSC Gazprom guarantees provision of additional amounts of natural gas for transit on the Gas pipeline in amount against 5 billion cubic meters in 2005 to 19 billion cubic meters in 2010 over the amounts established by the Agreement between the Government of the Russian Federation and the Cabinet of Ministers of Ukraine on additional measures for ensuring transit of the Russian natural gas for the territory of Ukraine of October 4, 2001 through collection points on border the Russian Federation / Ukraine, the Republic Belarus/Ukraine for transit through the territory of Ukraine for the purpose of loading of the Gas pipeline, and the further growth in volumes of transit of natural gas till 2030 will be determined proceeding from the needs of the European market of gas for it and cost efficiency of deliveries.

The Russian side will provide signing through JSC Gazprom of the necessary contracts guaranteeing acceptance of additional amounts of gas from the Gas pipeline.

The Ukrainian Side guarantees transit of the provided gas amounts in the Uzhhorod direction in full.

Conditions of transit of natural gas on the Gas pipeline are determined in contracts between Consortium and Authorized organizations of the Parties.

Article 4

The consortium acts as the customer on the Gas pipeline construction.

The gas pipeline will belong to Consortium on the property right.

Article 5

The choice of the contractor on construction, and also delivery of the material resources necessary for construction and commissioning of the Gas pipeline, is performed on tender basis, is preferential from among the Russian and Ukrainian business entities, on condition of competitiveness of the delivered goods, works and services.

The parties charge to the relevant state departments to provide the simplified procedure for the omission through borders of the states of the Parties of the specialists, materials, the construction machinery and equipment necessary for works on construction and ввода# in operation of the Gas pipeline.

Article 6

The Ukrainian Side will provide necessary conditions for free work on construction and operation of the Gas pipeline, registration by Consortium of all necessary permissions and licenses, including provision of the rights to use (branch) of the parcels of land and on attraction of financing, the credits and registration of providing for benefit of creditors.

Article 7

Financing of the project on construction of the Gas pipeline is provided by attraction by Consortium of own means of Authorized organizations of the Parties, and also the credits under separate corporate guarantees of Authorized organizations of the Parties in equal ratio.

Article 8

The tariff charge for transportation services of natural gas on the Gas pipeline is established in the transportation contract of natural gas on this Gas pipeline in the consent of the parties of such contract, proceeding from providing conditions of attraction and return of the borrowed funds used on construction, coverings of expenses on tax payment, charges, duties and other obligatory payments in the territory of Ukraine and also ensuring continuous and profitable financial and economic activities of Consortium.

Article 9

Income of Consortium gained from operation of the Gas pipeline is exempted from the tax discharge on profit on the Gas pipeline payback period determined in the feasibility statement on the construction project which affirms Authorized organizations of the Parties, from the effective date this Agreement and on condition of obligatory conducting separate accounting of the income and expenses received as a result of its operation and implementation of other activities.

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