Deal finally reached in Russian-Ukrainian gas dispute
It if confirmed. After lengthy negations, Russian and Ukrainian PMs have signed a deal that will not only see gas transit to Europe restored but will resume gas supplies to Ukraine itself. This is a major break in the two week long impasse in gas delivery negotiations between Russia, Ukraine, and the European Union.
After a lot of finger-pointing, unfulfilled guarantees, and revising of contracts that happened between Russian and Ukrainian gas officials during the past two weeks, many in Europe and around the world must have been hesitant to believe in the credibility of today’s deal until the official signing, which was attended by both PMs Vladimir Putin and Yulia Timoshenko as well as the heads of Gazprom Alexei Miller and Naftogaz Oleg Dubyna.
The gist of the deal is that Russia will charge Ukraine 20% less than its European customers for gas in 2009. In response, Ukraine will not change its 2008 transit fee. Starting next year, however, both countries will pay market prices, meaning Ukraine will have to pay European gas rates, while Russia will have to pay market transit fee.
Meanwhile, European Union is hoping no more contract breaches and disputes will happen between Russia and Ukraine, and the much needed gas will finally reach gas-deprived Europe.
Russia and Ukraine signed a 10-year deal on Monday to renew supplies of Russian gas to Ukraine and Europe, a Reuters reporter at the signing ceremony said.
Russian Prime Minister Vladimir Putin said at the signing ceremony he expects full gas flows to resume through Ukraine to Europe in the near future.
Putin also said intermediaries would be removed from gas trade with Ukraine. The signing ceremony was also attended by Ukrainian Prime Minister Yulia Tymoshenko, Gazprom (GAZP.MM) head Alexei Miller and Naftogaz head Oleh Dubyna.
Tymoshenko and Putin Sunday agreed that Russia will give Ukraine a 20 percent discount on the price it charges Europe for gas. In exchange, Ukraine will not hike the fees it charges Russia to transport gas onward to European countries.
Under the deal, Ukraine will pay $360 per 1,000 cubic meters of gas in 2009, and charge Russia a transit rate of $1.7 per 1,000 cubic meters per 100 kilometers that it had been paying in 2008. But starting from next year, both countries will switch to the full European market gas prices, both for gas purchases and the transit.