Russia and Ukraine sign gas deal

Russian gas will continue to flow through Ukraine throughout the winter months despite the two countries at loggerheads over the situation in eastern Ukraine, following a signing ceremony on Thursday. During the ceremony, the two sides agreed that Russia will resume passing gas into Ukraine following a bitter dispute over gas payments.

The European Union welcomed this deal. Outgoing European Commission President Jose Manuel Barroso described it as “a very impoertant agreement”.

“There is now no reason for people in Europe to stay cold this winter,” Barroso said.

Outgoing EU Energy Commissioner Guenther Oettinger said that this $4.6 billion deal should extend to the spring, meaning that “we can guarantee a security of supply over the winter”, not only to Ukraine but to its neighbouring countries as well. While the gas agreement has long rested on the issue over whether Ukraine can afford to pay for the gas, Oettinger believes that they are in a position to do so.

“[The deal] is perhaps the first glimmer of a relaxation in the relations between neighbours,” Oettinger said.

Ukrainian Prime Minister Arseniy Yatsenyuk said the amount Ukraine would pay for Russian gas will be in line with global oil prices, which have fallen in recent weeks. Yatsenyuk told a cabinet meeting in Kiev that Ukraine could pay $365 per 1000 cubic meters of gas as from the start of next year, a reduction from the $385 rate that was agreed earlier this month. He said that the price could be adjusted to $378 until the end of the year.

Russia cut off its gas supplies to Ukraine in July following dispute over Russia’s annexation of Crimea and its support for rebels in eastern Ukraine. Ukraine has since been relying on its own gas reserves and gas imported from other European countries. However, the need to find a resolution with Russia has become more urgent as winter is fast approaching. Temperatures in Ukrainian winters often sink to below freezing for days.
While Russian President Vladimir Putin and Ukrainian President Petro Poroshenko agreed on the broad outlines of a gas deal earlier this month, financial issues centring around payment guarantees for Russia have halted progress in these talks. Barroso conferred with Poroshenko in Kiev “a number of times” on Wednesday and said that “an agreement was within reach”. The EU has previously said that Ukraine would settle its gas debt to Russia through a $1.45 billion payment by the end of the month and a further $1.65 billion payment by the end of the year. The EU also said that Ukraine would pay $385 per 1000 cubic metres for new gas deliveries, which Russia should deliver following advance payments by Ukraine.