Russia, Ukraine and EU Reach Gas Supply Deal
Ukraine, Russia and the European Union signed a deal on Thursday that will allow Moscow to resume sending vital supplies of gas to its ex-Soviet neighbor just in time for the winter, in return for payments funded in part by Kyiv’s Western creditors.
After several failed rounds of talks, the accord also eases concerns that a new “gas war” could disrupt winter energy supplies if energy to EU states.
According to Reuters, the package is valued at US $4.6 billion in total. The agreement requires Ukraine to pay $3.1 billion in two allotments by the end of 2014 to cover debts for previous supplies from Russia’s state-majority owned Gazprom, and Kyiv will have $1.5 billion, some from existing accords with the EU and the International Monetary Fund. Russia is insisting on cash up front for the approximately 4 billion cubic meters of new gas supplies until March.
The deal comes as a relief to EU, who has a vested interest in gas freely flowing from Russia through the Ukraine to Europe for the upcoming winter.
Gazprom had most recently stopped supplying its Ukrainian partner, NAK Naftogaz Ukrainy in June because of unpaid bills of more than US$5 billion as the fighting went on, causing Gazprom to switch Kyiv to a prepayment system for gas supplies.
Between 2006 and 2009, Gazprom shut the taps as well, leaving many homes in Central and Eastern Europe without heat and forcing industrial consumers to ration their supplies throughout the winter. On January 5, 2009, in a televised conversation between Prime Minister Vladimir Putin and Gazprom CEO Alexei Miller, Putin elaborated that the gas flow should be reduced by the amount Ukraine had allegedly stolen since deliveries ended on January 1, and instructed Miller to inform Gazprom’s European partners, which include German, French and Italian companies.
In August, Ukraine’s parliament passed a law allowing foreign companies from the U.S. and EU to co-manage its national gas transportation system which has a value of around US$25-35 billion. Ukraine will control 51 percent and foreign partners will be allowed to own 49 percent of the venture.