Russia and Ukraine clinch gas deal despite rivalry

Russian energy minister Alexander Novak , left, and Ukrainian counterpart Yuriy Prodan. Picture: AP
Russian energy minister Alexander Novak , left, and Ukrainian counterpart Yuriy Prodan. Picture: AP
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Moscow and Kiev have agreed a deal that will guarantee Russian gas exports flow into Ukraine throughout the winter – despite their intense ongoing rivalry and fighting in eastern parts of the country.

Russia gas export monopoly Gazprom yesterday said it might restart gas supply to Ukraine as soon as next week if Kiev pays $2.2 billion (£1.3bn) worth of debt and pre-payments.

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Moscow, Kiev and the ­European Union (EU) clinched an agreement late on Thursday to resume supplies of Russian gas to Ukraine over the winter and secure transit of gas via Ukraine to Europe, despite tensions over a pro-Russian separatist rebellion in east Ukraine.

Gazprom halted supplies to Ukraine in June amid a bitter dispute over debts and pricing between Moscow and the former Soviet republic, which is now seeking to foster closer ties with the West, rather than ­Russia.

Gazprom chief executive Alexei Miller said his company would restart the flow of gas within two days of Kiev making its payment.

He told Russian state TV: “Everything depends on when Ukraine makes this payment. We understand this can happen by the end of next week.”

Yesterday, the Kremlin welcomed the deal as “an important step in the context of ensuring further uninterrupted gas transit to Europe”. Russia provides about a third of the EU’s gas supplies, pumping half of that amount through pipelines that cross Ukraine.

Speaking in Kiev, Ukraine’s prime minister Arseny Yatseniuk said he was determined to ensure safe transit to the EU, a crucial partner for Kiev in dealing with Russia over the rebellion in the east and a creditor of Ukraine’s bankrupt economy.

“Ukraine will safeguard the transit and won’t give Russia a chance to blackmail Ukraine and Europe,” Mr Yatseniuk said.

Under the gas agreement, which covers the period from this month to March 2015, Ukraine must fork out $1.45bn toward its gas debt and pay up-front for November ­supplies.

Mr Miller put the pre-payment at $760 million. Kiev must also pay a total of $3.1bn in debts for past deliveries by the end of the year, or supplies will cease from 2015.

Gazprom, in turn, will refrain from using a contractual “take-or-pay” clause until the end of March. The clause requires Ukraine to pay fines if it takes less gas than specified in the long-term contract.

The deal allows Ukraine to use resources from existing financial aid schemes provided by the EU and the International Monetary Fund to cover the pre-payment.

Ukraine said it had resources put aside to cover the past debts to Gazprom.

Kiev said documents signed in Brussels included guarantees by the EU of financial support to Ukraine should Russia renege on the agreed price as well as a promise of support for increasing reverse gas flows to Ukraine from EU member states.

The deal caused a sharp fall in wholesale prices and put the UK’s energy companies under pressure to cut bills. The cost of buying UK natural gas for the first quarter of next year is about a fifth cheaper than a year ago.

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