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Ukraine, Russia Strike Interim Gas Deal

September 26, 2014
by Rikard Jozwiak

The European Union, Ukraine, and Russia have agreed on an interim solution for natural gas flows which could prevent energy shortages in both Ukraine and EU countries this winter.

Speaking after a trilateral meeting in Berlin, EU Energy Commissioner Guenther Oettinger said Ukraine must pay $2 billion to Russia by the end of October and another $1.1 billion at the end of the year for outstanding bills.

Oettinger, who held talks with Russian Energy Minister Aleksandr Novak and Ukrainian Minister of Energy and Coal Industry Yuriy Prodan, said the EU believes 'this is an acceptable interim solution to ensure the supply of gas next winter and until spring.'

Under the proposed deal, if Moscow receives the $2 billion at the end of October plus a prepayment for new gas at $385 per 1,000 cubic meters of gas, Russia will deliver 5 billion cubic meters of gas to Ukraine.

Both Russia and Ukraine have filed suits with the Stockholm Court of Arbitration over their gas-pricing dispute, in which Russia announced dramatic increases to Kyiv after the ouster of pro-Moscow President Viktor Yanukovych in late February.

If Kyiv wins its case in Stockholm, it will not have to pay more than the $3.1 billion it is expected to pay under the interim agreement by the end of 2014.

If Russia wins the case, however, Kyiv has to pay an additional $2.1 billion.

Ukrainian Prime Minister Arseniy Yatsenyuk said on September 26 that 'under no circumstances' will Kyiv dismiss its case against Russia over the pricing of gas.

Oettinger said that both Ukrainian and Russian officials would have to discuss the proposed agreement with their respective governments.

Prodan said Ukraine is still against the $385 price for 1,000 cubic meters of gas, saying that it is higher than the market price and that which other European countries pay for natural gas from Gazprom.

'Unfortunately, we have not agreed on the price-formation mechanism with Russia,' Prodan said.

Earlier on September 26, Hungarian Prime Minister Viktor Orban said he had stopped sending reverse-flow gas to Ukraine the previous day because he could not risk Hungary's gas deliveries from Russia.

Orban said Budapest 'cannot get into a situation in which, due to the Russian-Ukrainian conflict, it cannot access its required supply of energy.'

Moscow has warned that Europe is contractually not allowed to re-export gas to Ukraine and could see its supplies cut if it did so.

The EU had earlier criticized Hungary for ending its gas deliveries to Ukraine. Kyiv also expressed its unhappiness with the decision.

With reporting by AP and Reuters

Source: http://www.rferl.org/content/gazprom-ukraine- deal-russia-eu-oettinger/26607903.html

Copyright (c) 2014. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.