Prices for Central Asian gas are going to rise to match Europeans prices. The nation probably most interested in this is Ukraine, as the hike portends higher prices for that nation. The two-rail bank shot would be Russia pays higher prices for gas from Central Asia, and in turn Ukraine pays higher prices to Russia. From Kommersant,

Gazprom, KazMunayGaz, Uzbekneftegaz and Turkmengaz officially declared yesterday the transfer to the European prices for the Central Asia’s gas in 2009. No price formula has been worked out yet, but it is known that Turkmenistan is willing to hike the price from $130 to $150 per a thousand cu meters in 2008 to between $250 and 270 per a thousand cu meters in 2009. The timing of this statement is interesting. Made on the eve of another round of negotiations with Ukraine, it signals Kiev will no longer find a supplier of cheap gas.

As RIA Novosti says, Russia and Ukraine are currently meeting to talk about prices,

Russia and Ukraine launched on Wednesday a new round of natural gas talks which will be continued on Thursday, a source close to the negotiations on the long-running dispute said.

The former Soviet allies partially resolved their gas dispute last Thursday, agreeing that Ukraine would pay off about $1 billion of its debt and that talks would continue on a supply scheme for 2008. The agreement came after Russian gas monopoly Gazprom restored gas supplies to Ukraine, which were cut by 50% early last week.

However, Ukraine is drawing a line in the sand,

Ukraine will not buy Russian gas at prices higher than 179.5 dollars per 1,000 cubic meters, Ukrainian Prime Minister Yulia Timoshenko stated on Tuesday commenting on media reports saying Ukraine was ready to pay over 300 dollars.

“A delegation of Naftogaz Ukrainy has got clear instructions from the government that the price of Russian gas in 2008 cannot exceed 179.5 dollars per 1,000 cubic meters. At the same time, the price of Central Asian gas cannot exceed 130 dollars,” the prime minister said.

From the Financial Times,

The announcement, made after Gazprom’s chief executive, Alexey Miller, met with top energy executives from Kazakhstan, Turkmenistan and Uzbekistan, signals that Ukraine could face a fourth stiff price increase on gas in as many years. European consumers could also face higher prices. Gazprom said the Central Asian producers had told it that “starting from 2009 natural gas will be sold at European prices”.

Ukraine doesn’t have a lot of alternative options at the moment, however, when it comes to gas supplies. It may have to bend to higher prices.

One thing is certain. Russia will continue to press its thumb on Ukraine until Ukraine gives up any notion of joining NATO.