Ukraine, Moscow clinch deal on Russian gas supply

BRUSSELS - The Associated Press

EU Commissioner for Energy Guenther Oettinger (C) Russian Energy Minister Alexander Novak (L) and Ukrainian Energy Minister Yuriy Prodan (R) shake hands after they signed an agreement that guarantees Russian gas will continue to flow to Ukraine, Oct. 30. AP Photo

Moscow and Kiev on Oct. 30 clinched a deal that will guarantee that Russian gas exports flow into Ukraine and beyond to the European Union throughout the winter despite their intense rivalry over the fighting in eastern Ukraine.

"There is now no reason for people in Europe to stay cold this winter," said EU Commission President Jose Manuel Barroso, whose offices mediated the talks for months.

He said he was "hopeful that the agreement can contribute to increase trust between Russia and Ukraine."

EU energy chief Guenther Oettinger said that "we can guarantee a security of supply over the winter," not only for Ukraine but also for the EU nations closest to the region that stood to suffer should the gas standoff have worsened.

The agreement long hinged on the question whether Ukraine was in a position to come up with the necessary cash to pay for the gas. "Yes, they are," a confident Oettinger said. The EU is set to come forward with aid to back up the cash-strapped government in Kiev.

Oettinger said the $4.6 billion deal should extend to the spring.

"We can claim and pay for amounts that we need. That question has been totally settled," said Yuriy Prodan, Ukrainian Minister for Energy.

After gas stopped flowing over the summer, Prodan said that it would resume its way into Ukraine "straight after we pay $1.45 billion" in a first portion. "There will be no problems."

The deal only stretches through March and the difficulties of the talks were immediately evident when the Russians and Ukrainians started disagreeing on terms and prices of gas for next summer.

Russian President Vladimir Putin and his Ukrainian counterpart, Petro Poroshenko, agreed earlier this month on the broad outline of a deal, but financial issues, centering on payment guarantees for Moscow, had long bogged down talks.

But with each week, the need for a resolution becomes more pressing, since winter is fast approaching in Ukraine, where temperatures often sink below freezing for days.

Russia cut off gas supplies to Ukraine in June after disputes over Russia's annexation of Crimea in March. Ukraine since then has been relying on gas transfers from other European countries and its own reserves.

The EU has said previously that Ukraine would settle its energy debt to Russia with a $1.45 billion payment by the end of the month and $1.65 billion more by year's end. It has said for new gas deliveries, Ukraine would pay $385 per 1,000 cubic meters, which Russia should deliver following advance payments by Ukraine.