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RUSSIA AND UKRAINE REACH GAS AGREEMENT SECURING WINTER SUPPLY FOR EU

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Russia, Ukiraine and EU sign gas agreement

RUSSIA AND UKRAINE REACH GAS AGREEMENT SECURING WINTER SUPPLY FOR EU

Oct 31 2014, 11:20am GMT

Stock.com

Ukraine agreed to pay $378 per thousand cubic meters until the end of 2014 and $365 until March. Initially, Russia demanded $485 per thousand cubic meters. Alexander Novak, the Russian energy minister, said that Moscow had made this “compromise” to show that it is a reliable commercial partner for the EU, as Financial Times report.

Ukraine also agreed to pay the debt of $1,4 billion in the next few days  for the Russian gas supply of November and December 2013, said Mr. Novak.  In total, Ukraine promised to pay back $3,1 billion debt to Gazprom  by the end of 2014.

Russia evaluates Ukraine’s total debt at $5,3 billion. However, Kiev does not recognize $2,2 billion as part of their debt, claiming that Gazprom sold at an inflated price during spring 2014.

Kiev appealed to the Stockholm Arbitration Tribunal in regards to the gas agreement signed in 2009 between Gazprom and Ukraine’s Naftogaz, claiming that Gazprom charged prices a lot higher than the market.

Russia was presented with guarantees that Ukraine can indeed pay for the gas that they want to purchase. One of the reasons the agreement could not be reached previously, on the 21 October, was that Ukraine was not able to provide proof of funds demanded by Russia.

EU Commission President Jose Manuel Barroso said that EU is ready to help Ukraine with the payments through aid and guarantees and reassured that “There is no reason for people in Europe to stay cold this winter.”

The gas conflict reached its peak when Russia stopped supplying Ukraine with gas over four months ago. The round of negotiations, which finally led to the agreement last night, began in early May after Gazprom raised the gas price for Ukraine in March when it took over the Crimea and imposed export tax. Ukraine’s responded by ceasing all payments. In June, Russia had cut the gas supplies to Ukraine again and demanded that Kiev pays its gas debt of over $5 billion and pays upfront for future deliveries.

If the agreement with Gazprom would not have been reached, Ukraine was in danger of using up all of its gas reserves this winter. The reserves are only half full and would not be enough for Ukraine, let alone transits to EU. EU imports half of its gas supplies through Ukraine and 60% of the total import comes from the Russian Gazprom.

The EU’S energy commissioner, Günther Oettinger said about the agreement reached: “It is a first glimmer of a thaw between the two countries.”

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