Oct 30, 2014 6:16 PM

Ukraine, Moscow clinch deal on Russian gas supply

The Associated Press

BRUSSELS (AP) Moscow and Kiev on Thursday clinched a multi-billion dollar 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.

EU Commission President Jose Manuel Barroso, whose offices mediated the talks for months, said the EU will also help cash-strapped Ukraine with the payments through aid and guarantees.

"There is now no reason for people in Europe to stay cold this winter," he said. Barroso added that 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.

A similar standoff in 2009 had caused serious disruptions in gas flowing from Russia into the EU and it was a prospect the bloc sought to avoid.

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. Oettinger said the $4.6 billion deal should extend through March.

"We can claim and pay for amounts that we need. That question has been totally settled," said Yuriy Prodan, Ukrainian Minister for Energy. "There will be no problems."

Under the deal, Ukraine would pay for its outstanding debt by making a $1.45 billion deposit without delay, and $1.65 billion by year's end. The final sum of debt would be determined through arbitration.

For new gas, Russia will only deliver after pre-payment and Ukraine intends to buy some $1.5 billion by the end of December.

The EU said in a statement it had been "working intensively" with international institutions and Ukraine to secure funds to pay for gas delivery in the coming winter.

"Unprecedented levels of EU aid will be disbursed in a timely manner," it said.

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.


Associated Press writer Peter Leonard in Kiev, Ukraine, contributed to this report.


Raf Casert can be followed on Twitter at http://www.twitter.com/rcasert


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