Ukraine backs off from EU-backed Russia gas deal

KIEV - Agence France-Presse

This file picture shows of a pressure valve on a pipeline at the Bilche-Volytsko-Uherske underground gas storage facility, the largest in Europe, in the Lviv region of western Ukraine. AFP Photo

War-torn Ukraine has distanced itself from an EU-brokered agreement with Russia that would have restored its gas supplies during winter and helped rebuild trust between the neighbouring foes.

EU Energy Commissioner Guenther Oettinger emerged from hours of acrimonious negotiations in Berlin on Friday to pronounce the three-month dispute on the verge of being resolved.

He and Russia's energy minister added that a final agreement could be signed after consultations in Moscow and Kiev next week.

However Ukraine's top energy officials vowed on Sept. 27 to keep fighting over both the gas price and Moscow's claim that Kiev owed it billions of dollars in debt.

"No final decision was adopted. Not a single document was signed - period," Naftogaz state energy firm chief Andriy Kobolev wrote in a Facebook post.

A deal would not only save the Westward-leaning nation from adopting drastic energy savings measures in freezing weather but also make sure that Russian gas flowed uninterrupted to European homes further down the pipeline.

Yet the meeting came with trust between all sides lacking and any remaining goodwill between Moscow and Kiev dependent on the fate of a fragile truce in a pro-Russian uprising in eastern Ukraine that has claimed more than 3,200 lives. Russia froze natural gas deliveries to Ukraine in June.

Oettinger said a compromise deal would see Russia ship at least 5.0 billion cubic metres of gas to Ukraine over a six-month period in exchange for an early payment of $3.1 billion (2.4 billion euros).

That volume roughly covers the amount of gas Ukraine says it needs to make it safely through the winter. The price translates to $385 per 1,000 cubic metres - 20 percent less than the figure Russia began charging Ukraine in the wake of the February ouster in Kiev of an unpopular Kremlin-backed president.

But Russia said the $3.1 billion would be used to cover a $5.3-billion debt Ukraine incurred last year due to both its financial problems and a refusal to pay the higher rate.

Moscow added that the $385 figure was only a temporary discount which would expire next spring.     "The chances of us reaching a final agreement along these lines are high," Russian Energy Minister Alexander Novak told the Vesti 24 state news channel.

Ukraine disputed both points and Oettinger himself shed little light on which side was right. "There are still lots of disagreements," Ukrainian Energy Minister Yuriy Prodan told AFP by telephone shortly after the Berlin talks broke up.

Naftogaz and Gazprom have filed mutual claims over the entire dispute with a Stockholm arbitration tribunal. Oettinger said a more permanent arrangement could be worked out once a verdict is issued in the first half of 2015.

A senior U.S. official said Sept. 27 that Washington stands ready to help Ukraine attract private U.S. investment if Kiev acts to root out corruption.

"The U.S. has a stake in helping Ukraine build a stable and prosperous country that benefits all of its citizens," U.S. Secretary of Commerce Penny Pritzker said after meeting Ukraine's leaders in Kiev. 

Ukraine's pipeline transmits just 15 percent of the Russian gas imported by Europe. But EU powers such as Italy - reliant on the Ukrainian link for all their Russian supplies - fear that Kiev may be forced to tap into those flows once the winter heating season begins.

The apparent failure to achieve meaningful progress came as Moscow-Kiev relations remain dependent on the survival of a tenuous peace pact that has been unveiled in stages since early September but whose terms remain unfulfilled.

Russian and Ukrainian defence officials did take a cautious step on Sept. 26 toward establishing a 30-kilometer buffer zone along the front line that made sure the five-month war did not resume.

The Ukrainian defence ministry said both guerrillas and government forces would begin "a gradual withdrawal of forces" if no truce violations were recorded in the two days.

The military spokesman said one Ukrainian soldier and a civilian had been killed since Sept. 26 morning.