Russia, Ukraine strike deal on winter gas supplies to Kiev


Russian Energy Minister Alexander Novak and his Ukrainian counterpart Vladimir Demchyshyn reached a deal Friday to provide Kiev with gas supplies for the upcoming winter, following months of tough negotiations.

Cash-strapped Ukraine has been heavily dependent on energy from Russia and is also a key transit country for supplies to Western Europe. The European Union has brokered the talks between the two sides amid strains over the conflict in eastern Ukraine.

“This is a crucial step towards ensuring that Ukraine has sufficient gas supplies in the coming winter and that there will be no threat to continued, safe and reliable gas transit from Russia to the European Union,” Sefcovic said after five hours of talks in Brussels.

The meeting also included the heads of Russian energy giant Gazprom and Ukrainian supplier Naftogaz.

Under the deal, Ukraine will pay a reduced price of 232 dollars per thousand cubic metres of gas for supplies between October 1 and March 31 – down from a contractual price of 251 dollars, Sefcovic said. The difference is due to a lowering of Russian export duties.

Ukraine has committed itself to buying 2 billion cubic metres of gas for underground storage in October, the commissioner added, noting that the government in Kiev is providing Naftogaz with 500 million dollars for this purpose.

The commission, meanwhile, has committed itself to help organize the necessary financing of Ukraine’s winter gas purchases through “European and international financial institutions,” the EU’s executive said in a statement.

Gazprom has also agreed to waive the take-or-pay terms of its 2009 contract with Naftogaz, under which the Ukrainian company would be obliged to pay for a certain volume of gas regardless of whether it actually took it.

“The negotiation process has been difficult,” Novak said after Friday’s talks.

In July, Russia cut off its gas shipments to Ukraine, after an initial failure by both sides to reach an energy deal. Moscow and Kiev have clashed in the past over energy prices and unpaid gas bills.

Demchyshyn said that the “commercial conditions are acceptable for [the] Ukrainian side,” but noted that some “remaining procedures” had to be completed before the deal can be formally signed. Neither side went into further detail.

Ukraine needs to fill its storage tanks with an overall 19 billion cubic metres of gas in order comfortably to get through until the end of March, when the worst of the winter is over, according to the commission.

Relations between Moscow and Kiev are at an all-time low, due to Russia’s annexation of Ukraine’s Crimean peninsula and its support for the cause of a pro-Russian separatist rebellion in the country’s two easternmost regions.