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Russia slaps conditions on Ukraine gas deal

Russia has raised further conditions for resuming gas supplies to Ukraine, dashing hopes that a deal to safeguard Europe’s energy supply this winter would be agreed on Tuesday.

Moscow cut gas exports to Ukraine in June amid a payment dispute, and talks on restarting flows have been weighed down by the conflict between Kiev’s forces and pro-Russian militias. However, many officials had expected that a new deal on a gas price and a timetable for settling debts would be reached at a meeting in Brussels.

Instead, Russia made another demand, asking for evidence to be submitted within five days that international lenders or other organisations were able to guarantee Kiev as good for its money.

Alexander Novak, Russia’s energy minister, complained that Ukraine had not identified its sources of funding. “We believe that there could have been rather more thorough work,” he said after the talks. “The cash gap requires funding.”

He said that he was looking for assurances that the likes of the International Monetary Fund, the European Investment Bank or “first-class” banks would help Kiev pay its bills. He also suggested that the European Commission could use its own budget.

“We have not received these assurances,” he said.

Another meeting will be held in Brussels on October 29, at which Russia will be expected to declare whether it is satisfied with Ukraine’s payment plan. A failure to agree a deal by the end of October will heighten fears of supply disruptions to the EU over the winter.

Russia supplies 30 per cent of the EU’s gas – with about half flowing through Ukraine. If Russia’s southern neighbour itself has no gas over the winter, EU countries fear it would feel pressured to siphon off transit gas from pipelines running west.

Until Russia raised its demand, an agreement had seemed very close. Both the Ukrainians and Russians said that they had agreed a price for gas until March of $385 per thousand cubic metres, which Kiev would pay in advance.

Ukraine has also agreed to pay back $3.1bn of debt to Gazprom, Russia’s gas export monopoly, in two instalments: $1.45bn must be paid by the end of October and the remainder by the end of the year.

When asked whether Ukraine had accepted a demand to prove its solvency to strike the deal, Yuri Prodan, Kiev’s energy minister, said that he was willing to work with the European Commission to find a compromise. Günther Oettinger, the EU’s energy commissioner, said that he was unable to give an assurance that the EU would act as a guarantor.

If Ukraine still has no supplies from Gazprom during the winter, the EU promises to give it a lifeline with reverse flows – selling Russian gas back into Ukraine.

But Mr Novak repeated Russia’s threat that it regarded such support to Ukraine as illegal. He declined to say what action Russia would take, but eastern EU nations have received specific warnings from Moscow that their gas supplies will be reduced if they export to Ukraine.

Source: Financial Times





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