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Sep 26, 2014 10:44 AM

EU proposes deal to ensure Ukraine gas supplies

The Associated Press

BERLIN (AP) A top European Union official proposed a deal Friday that would see Ukraine repay some of its gas debt to Russia in exchange for guaranteed gas deliveries over the harsh winter months.

The plan outlined by EU Energy Commissioner Guenther Oettinger came after meetings with the Russian and Ukrainian energy ministers in Berlin. Pressure is mounting to solve the long-running gas dispute which resulted in Moscow cutting off supplies to Kiev more than three months ago.

Oettinger billed the idea as a "winter package" something to take Ukraine through the coming months while the question of past and future gas prices would be resolved at an arbitration court in Stockholm.

Oettinger told reporters that under the proposal, Kiev would pay $2 billion to Moscow by the end of October and another $1.1 billion by the end of December.

In exchange, Russian gas company Gazprom would supply at least 5 billion cubic meters of gas to Ukraine over the coming months at $385 per 1,000 cubic meters. Ukraine would have to prepay for that new gas.

Oettinger said he wants to have clarity next week on whether the two sides accept, and plans to bring them together again in Berlin late next week. Both sides are now to discuss the proposal with their capitals.

Russian Energy Minister Alexander Novak said the draft of the deal was largely "to our satisfaction," though there remain some minor details that need clarification.

He insisted that "gas will only be supplied if prepayments have been made."

Oettinger indicated that the EU would guarantee the Ukrainian debt payments.

The dispute is part of a wider conflict over Ukraine's relations with Russia and the West, and involves the price of Russian gas supplies and Kiev's historic gas debts.

Ukraine needs deliveries to resume if it is to keep its industries running through the winter. Meanwhile, much of the Russian gas supplied to EU countries passes through pipelines that cross Ukraine.

Russia shut off supplies to Ukraine this summer but still allows gas to transit through its pipeline network to customers in the rest of Europe. Poland, Hungary and some other European countries have been selling some of their gas to Ukraine via so-called "reverse flow" shipments, which Moscow dislikes.

Recently, some of these countries have had trouble supplying Ukraine with gas as they build their own reserves ahead of the winter and amid reports of tighter controls by Russia. Poland this month halted deliveries for a week, citing inadequate supplies from Russia.

On Thursday, Hungarian pipeline operator FGSZ said it suspended deliveries to Ukraine indefinitely, citing the need for technical work to "manage the security supply" in the face of increasing demand.

Asked about Hungary's move, EU Commission spokeswoman Helen Kearns in Brussels said the commission expects "all member states to facilitate reverse flows as agreed ... in the interest of a shared energy security."

Kearns said there is nothing to prevent EU companies disposing freely of gas purchased from Gazprom. Russia's Novak, however, said that the contracts don't foresee any re-exports.

Russia stopped gas deliveries to Ukraine after the two sides failed to agree on a formula for paying what Gazprom said this month are $5.3 billion in gas debts, and Moscow demanded upfront payments for future supplies. Based on the price Ukraine claims Russia should charge, the debt is $3.1 billion.

The two sides have also failed to bridge differences over the future gas price for Ukraine, with Kiev insisting on a lower price than Moscow offered.

Previous three-way talks failed to avert the gas cutoff.

EU member states got 24 percent of their gas in 2012 from Russia, according to industry association Eurogas, and about half of that goes through the pipelines across Ukraine. In 2013, Ukraine imported nearly 26 billion cubic meters of gas from Russia, just over half its annual consumption.


Juergen Baetz in Brussels contributed to this report.


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