Ukraine and Russia clinch gas deal


Published: Friday 31st October 2014 by The News Editor

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Moscow and Kiev have clinched a deal that will guarantee that Russian gas exports flows into Ukraine throughout the winter despite their intense rivalry over the fighting in eastern Ukraine.

In the signing ceremony in Brussels following protracted negotiations, the two sides promised to get the gas flowing into Ukraine again after a long and bitter dispute over payments.

EU Commission president Jose Manuel Barroso, whose offices mediated the talks for months, said the EU will also help cash-strapped Ukraine with the payments through aid and guarantees.

“There is now no reason for people in Europe to stay cold this winter,” he said. He added that he was “hopeful that the agreement can contribute to increase trust between Russia and Ukraine”.

EU energy chief Guenther Oettinger said “we can guarantee a security of supply over the winter,” not only for Ukraine but also for the EU nations closest to the region that stood to suffer should the gas stand-off have worsened.

A similar stand-off in 2009 had caused serious disruptions in gas flowing from Russia into the EU and it was a prospect the bloc sought to avoid.

The agreement long hinged on the question of whether Ukraine was in a position to come up with the necessary cash to pay for the gas.

A confident Mr Oettinger said Kiev was, and that the £2.9 billion deal should extend through March.

“We can claim and pay for amounts that we need. That question has been totally settled,” said Yuriy Prodan, Ukrainian minister for energy. “There will be no problems.”

Under the deal, Ukraine would pay for its outstanding debt by making a £900,000 deposit without delay, and £1.03 billion by the end of the year. The final sum of debt would be determined through arbitration.

For new gas, Russia will only deliver after pre-payment and Ukraine intends to buy some £903,000 by the end of December.

The EU said in a statement it had been “working intensively” with international institutions and Ukraine to secure funds to pay for gas delivery in the coming winter.

“Unprecedented levels of EU aid will be disbursed in a timely manner,” it said.

The deal only stretches through March and the difficulties of the talks were immediately evident when the Russians and Ukrainians started disagreeing on terms and prices of gas for next summer.

Russian president Vladimir Putin and his Ukrainian counterpart, Petro Poroshenko, agreed earlier this month on the broad outline of a deal, but financial issues, focusing on payment guarantees for Moscow, had long bogged down talks.

But with each week, the need for a resolution becomes more pressing, since winter is fast approaching in Ukraine, where temperatures often sink below freezing for days.

Russia cut off gas supplies to Ukraine in June after disputes over Russia’s annexation of Crimea in March. Ukraine since then has been relying on gas transfers from other European countries and its own reserves.

Published: Friday 31st October 2014 by The News Editor

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