MOSCOW, March 25 – Ukraine and Russia on Thursday failed to reach a compromise for lowering natural gas prices, but agreed to continue discussions next month to explore a range of unspecified options.

The development is a setback for President Viktor Yanukovych, who had dispatched Prime Minister Mykola Azarov to Moscow to convince the Russian government to lower the prices.

Azarov, at a press conference with his Russian counterpart Vladimir Putin, said Ukraine will seek to find “compensators” that would persuade the Russians to lower the gas prices.

The parties did not specify exactly what had Ukraine offered in exchange for lowering gas prices, but Azarov said this would be a complex solution.

“We try to find compensators,” Azarov said. “We will find compensators that will be beneficial for both, Russia and Ukraine.”

Ukraine, which pays $305 per 1,000 cubic meters of Russian gas, has been seeking to reduce the prices to the $168/1,000 cu m paid by its neighbor Belarus.

Putin, who sought to defend the original gas agreement with Ukraine signed in January 2009, said Belarus’ gas price was the result of its close political integration with Moscow.

“Why does Belarus get gas one-third cheaper than others? Because we are building the Union State, and are building the Customs Union,” Putin said.

“Here you are and you get an interest for integration on the post-Soviet space, in particular between Russia and Ukraine,” Putin said.

Yanukovych, and Azarov, have said the 10-year gas agreement, which had been negotiated between Putin and then Prime Minister Yulia Tymoshenko, was unfair and setting the highest gas prices in Europe for Ukraine.

But Putin has indicated the Russian government is happy with the agreement.

“We don’t believe the parameters of this agreement are unfair and unbeneficial,” Putin said. “We understand that the one who’s buying always wants to buy cheaper, while the one who’s selling wants to sell more expensive. But we believe the document is balanced.”

Putin and Azarov agreed to meet again in Moscow in April for a new round of discussions over the gas prices and what will Ukraine offer in the exchange for the lower gas prices.

“This will be the right thing to do is we review our relations in a complex way,” Putin said. “We agreed that we have no closed topics. We will continue the talks.”

At the talks with Putin, Azarov was expected to suggest creation of a trilateral consortium that would manage Ukrainian gas pipelines in exchange for lowering gas prices.

The consortium would be jointly owned by Ukraine, Russia and the European Union, while the pipelines would remain to be the property of Ukraine.

Fending off political allegations in Ukraine that he was selling the country’s strategic assets, Azarov asked Putin to confirm that the proposal did not concern selling of the pipeline.

“But there were other proposals,” Putin replied.

Russia has been long interested in acquiring control over the Ukrainian gas pipelines that move 80% of Russia’s Europe-bound gas supplies and account for a lion’s share of Gazprom’s – and Russia’s - hard currency revenue.

But the interest in the pipelines declined over the past five years as Russia has been spending money and political capital to build Nord Stream and South Stream, two pipelines bypassing Ukraine on the way to Europe.

Putin underscored that logic, added that Russia had still been interested in the Ukrainian gas pipelines.

“Of course, this is reducing out interest, but it is still there,” Putin said. (nr/ez)