Russia, Ukraine agree to end gas crisis

20th January 2009, Comments 0 comments

The two sides signed a 10-year agreement on providing Russian gas for the Ukrainian market and said all disagreements on transit to the EU had been resolved.

Moscow -- Russia and Ukraine on Monday announced they had resolved the gas dispute that had cut supplies to a swathe of European countries, saying gas deliveries would resume soon.

But the European Union demanded to know exactly when natural gas would begin to flow again after a crisis that left millions of people in eastern and central Europe without heating in the middle of winter.

The two sides signed a 10-year agreement on providing Russian gas for the Ukrainian market and said all disagreements on transit to the EU had been resolved.

Russian energy giant Gazprom "has received an order to start supplies of gas on all routes proposed by our Ukrainian partners and in full volume. The company is ready to fulfil the daily requests of its European consumers," Russian Prime Minister Vladimir Putin said.

"I expect supplies of all Russian gas to Europe to be fully restored soon," he added at a signing ceremony in Moscow.

Ukrainian Prime Minister Yulia Tymoshenko said: "We will allow the transit as soon as the gas enters Ukraine's gas pipelines. There won't be any delay.

"We expect the Russian side to start deliveries of gas to the countries of the European Union in a matter of hours," Tymoshenko said.

The Ukrainian premier called Monday's agreement "historic" and said it would prevent future year-end gas crises.

"The most important thing is something never before achieved in Ukraine's 17 years of independence.

"That is a formula-based approach which excludes any subjective elements and gives reason to believe there won't be year-end debates in future years, won't be any falling out, but will be a normal, absolutely predictable process of price-setting for gas and tariffs for transportation," she said.

She also said the two sides would drop all claims against each other for losses incurred during the dispute, in which Russia says it has lost almost a billion dollars.

Kiev and Moscow "will put forward no claims for their losses" due to the conflict, Tymoshenko said.

The two sides did not specify what price Ukraine would pay this year for Russian gas, the point at the heart of the two countries' dispute, although Putin confirmed a 20 percent discount on what Russia regards as "market prices."

Tymoshenko indicated Ukraine would pay in the region of 230-250 dollars per 1,000 cubic metres for its domestic needs, but said the actual price would be revealed in a few days.

The crisis erupted on January 1 when Russia cut gas to Ukraine's domestic market over unpaid debts and demands for a higher price in 2009. The dispute escalated when Moscow halted all supplies for Europe transiting through Ukraine, accusing Kiev of stealing gas.

The agreement came as the EU grew increasingly exasperated at the shutdown of the main transit route for Russian supplies to the bloc, which had led to heating cuts and factory shutdowns across a swathe of countries.

"We now need an indication of the precise time that gas deliveries will be resumed. Our monitors will verify when the gas actually starts to flow," the EU's executive arm, the European Commission, said in Brussels.

Czech Industry Minister Martin Riman, whose country holds the EU's presidency, warned: "If the deliveries don't resume despite such strong declarations by the Russian and Ukrainian prime ministers, there will be a total crash in the confidence of EU consumers, citizens and the enterprise."

The crisis in supplies from Europe's main foreign gas supplier has forced a reconsideration in the 27-nation bloc of its dependence on Russia and some quick fixes to reorient pipeline routes to keep European industries working.

The outlines of an accord had been reached in marathon overnight talks between Putin and Tymoshenko in Moscow at the weekend.

Russia's President Dmitry Medvedev voiced confidence that the agreement would receive the approval of Ukrainian President Viktor Yushchenko, who has been sharply at odds with Tymoshenko over the issue.

Russian newspapers expressed doubts. The Kommersant daily, referring to the Tymoshenko-Yushchenko feud, said: "The risk of an escalation of the conflict cannot be ruled out until the new scheme is approved by... Yushchenko."


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