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Europe Cautiously Welcomes Russia-Ukraine Gas Deal

By Stefan Bos
18 January 2009

The European Commission is cautiously welcoming Sunday's announced natural gas deal between Russia and Ukraine, warning that there have been false hopes before and that it is waiting to see gas actually flowing to Europe. The prime ministers of the two countries are expected to oversee the signing of the gas supply and transit agreement Monday in Moscow.

In a statement Sunday, the European Union's executive body said it was pleased that Russian Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko agreed to resolve their countries' dispute over natural gas prices that affected nearly 20 countries throughout Europe.

The European Commission especially welcomed a pledge that Russian gas flows to Europe via Ukraine could resume as early as Monday.

But the Commission warned there had been "many false dawns in this dispute".

Earlier, Commission spokesman Johannes Laitenberger expressed frustration that tensions between Moscow and Kyiv resulted in a shutdown of natural gas deliveries.

"If the gas doesn't flow again, we will have to look point-by-point at our relations with Russia, with Ukraine, and assess in each case whether we can continue to do business as usual under these circumstances," said Johannes Laitenberger.

The troubles began on New Year's Day, when Russia halted gas shipments to Ukraine, saying its neighbor had outstanding bills of more $2 billion.

Moscow later demanded $450 per 1,000 cubic meters of gas for future deliveries - about twice the amount offered by Kyiv.

The dispute eventually led to a complete shutdown of gas deliveries to the rest of Europe, with Moscow and Kyiv blaming each other for the disruptions.

Russian Prime Minister Vladimir Putin told reporters that under the new deal, Ukraine will receive gas at a discount this year and Ukraine will charge Russia old prices for the transit of gas to Europe.

"Russia and Ukraine will switch to the European present formula in natural gas trade," said Putin. "At the same time, we have agreed that in 2009, we will make a 20 percent discount for our Ukrainian partners, on the condition that Russia retains a discounted tariff for the transit of its gas to Europe through Ukrainian territory in 2009. That is the same tariff it paid in 2008. At the same time, we have agreed that starting on January 1, 2010, we will completely switch to European standards in our pricing - both for gas supplies and for gas transit."

In comments aired by Russian television, Ukrainian Prime Minister Yulia Tymoshenko said natural gas would be flowing again soon, as Russian and Ukrainian energy firms work out the details.

"We have instructed [Ukraine's] Naftogaz and [Russia's] Gazprom chief executives to prepare all the paperwork according to the understandings we reached in our talks today, no later than Monday," said Tymoshenko. "Also, immediately after all the documents on gas transit and gas supplies are signed, all gas supplies to Europe will resume."

But Russia's President, Dmitri Medvedev, expressed concern that Ukraine's prime minister may not have the authority to implement the deal.

Speaking on Russian television, the Russian leader recalled political tensions between Ukrainian's prime minister and president, who did not attend the energy talks in Moscow.

"I sincerely hope that the prime minister of Ukraine, Yulia Tymoshenko, who is present at the conference today, has the necessary mandate to represent her country," said Medvedev.

After nearly two weeks without Russian gas, the resumption of deliveries cannot come soon enough - especially in Eastern European countries, where hundreds-of-thousands of people are without heat and many have perished due to the cold.

Several factories have been forced to suspend operations at a time when the region is suffering from the global economic crisis.

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