KIEV, Sept. 1 - Ukraine will try “one more time” to renegotiate its controversial 10-year natural gas agreement with Russia, Prime Minister Mykola Azarov said Thursday.

Azarov made comments a day after a warning from Gazprom that Ukraine will be subject to sanctions if it moves to drastically reduce gas imports from Russia.

“Despite all these statements that sound from our friendly Russia… we will try one more time to make a deal,” Azarov said in a speech addressing students at Taras Shevchenko University in Kiev.

He said if the parties fail to reach a deal on gas prices, there will be a major aggravation of the dispute, and suggested that Russian leaders would be responsible.

“Without a doubt all responsibility for consequences will lie on those leaders that don’t want to listen to our arguments,” Azarov said.

Serhiy Liovochkin, the chief of staff at President Viktor Yanukovych’s administration, said Wednesday that Ukraine set a deadline of October 15 for reaching the deal on gas prices with Russia, and said without the deal Ukraine will seek to abrogate the agreement by appealing to an international court.

Russian President Dmitry Medvedev said Wednesday that Russia would consider revising the deal only in exchange for Ukraine joining a Russia-led customs union -- a move that would halt its integration with the European Union -- or Kiev ceding control of its vast gas transit network. He scolded Ukraine, saying it was constantly asking Moscow for favors and offering nothing in return.

"They want neither the former, nor the latter," Medvedev said Wednesday. "Just give us the discount, that's all."

Azarov said Thursday Ukraine would not be able to join the customs union with Russia, because that would mean revising Ukraine's agreements with all its partners at the World Trade Organization. "It's absolutely unrealistic."

Ukraine usually begins its 6-month winter heating season on October 15 when gas consumption increases significantly and is used for generating heat energy to residential buildings.

Liovochkin suggested Ukraine has been overpaying at least $200 per 1,000 cubic meters for Russian gas.

Ukraine is buying Russian gas at about $355 per 1,000 cu m in the third quarter of 2011, compared with $297/1,000 cu m in the second quarter, according to Naftogaz Ukrayiny, the national energy company.

The prices include a discount of $100 per 1,000 cu m that Ukraine has negotiated with Russia in April 2010 in exchange for allowing stationing of Russian navy in Sevastopol for another 25 years through 2042. The discount is supposed to be in affect through 2020.

Ukraine is expected to import 40 billion cubic meters of gas from Russia, its only source of gas, in 2011. Ukraine also produces about 20 Bcm/year of gas domestically.

“The Russians are telling us: join the Customs Union and then you will receive a certain discount,” Azarov said. “But we say: we don’t need any discounts, we need a normal gas deal in which the price of gas that we buy does not exceed the price that Germany pays.”

“Germany is situated much farther away from Russia than Ukraine, and transportation of gas to Germany costs much more, but its price of gas is lower than for Ukraine,” Azarov said. “It’s a paradox.”

“We say: we don’t need any discounts, let us sign a normal agreement, the same as with any European country,” Azarov said.

As Russia and Ukraine failed to reach the deal on gas prices over the past 18 months of talks, Ukraine had announced plans to reduce Russian gas imports by 66% over the next five years.

Energy Minister Yuriy Boyko said Wednesday Ukraine will start cutting gas imports as soon as next year, and said Ukraine plans to import 27 billion cubic meters of Russian gas in 2012, down from 40 Bcm in 2011.

But hours later Gazprom CEO Alexei Miller responded with the warning that Ukraine, according to the gas contract signed in January 2009, is obliged to buy at least 33 Bcm annually through the end of 2019.

The failure to stick to this clause, known as the ‘take or pay’ condition, will trigger sanctions forcing Ukraine to pay for 33 Bcm even if the country reduces gas imports, Miller said.

Ukraine planned to reduce Russian gas imports to 12 Bcm/year by 2017 due to development of domestic gas resources, such as shale gas and coal. (tl/ez)