Russia and Ukraine reach gas deal

Videos
Photos

(Agencies)
Updated: 2009-01-18 19:59

MOSCOW -- Negotiations dragged into the early hours Sunday, but in the end the prime ministers of Russia and Ukraine announced a deal to settle the gas dispute that has drastically reduced supplies of Russian gas to Europe for nearly two weeks.

Russian President Dmitry Medvedev gestures as he speaks to the media after a meeting on the European gas crisis in Moscow, Saturday, Jan. 17, 2009. Ukrainian, Russian and European officials held talks in Moscow on Saturday in an effort to restore Russian natural gas supplies to Europe after an 11-day disruption of deliveries piped across Ukraine. [Agencies]

Russian Prime Minister Vladimir Putin said Ukraine will pay 20 percent less than the European price for this year. This means a substantial increase for Ukraine in the first quarter but the price could fall significantly later in the year as gas prices are expected to drop.

"The negotiations were difficult but we reached an agreement that will allow for a contract to be signed," Ukraine's Prime Minister Yulia Tymoshenko said, standing by Putin's side.

Tymoshenko said natural gas supplies would resume once the two countries' gas companies sign a contract. It was not clear how soon this would happen. But Russia's Gazprom and Ukraine's Naftogaz, both state controlled, were told to prepare the documents by Monday, she said.

Before walking out, Putin promised that gas supplies would be restored soon. Both countries had blamed the other for the shutoff of European-bound gas.

The two leaders reached the agreement in talks that stretched into the early hours of the morning after a meeting Saturday with leaders from the 27-nation European Union ended without a resolution.

The EU normally receives about one-fifth of its gas supplies through Ukraine. Nations in eastern Europe that rely on Russia have been left with virtually no new supplies.

The EU threatened to review its relations with both countries if their dispute is not resolved this weekend. EU spokesman Ferran Tarradellas said Saturday that the EU delegation was "encouraged by the discussions" because Russia and Ukraine were seeking solutions rather than just blaming each other, but "what matters are results."

Ukraine paid $179.50 per 1,000 cubic meters of gas in 2008, less than half the price paid by European countries. The European price for the first quarter of 2009 is about $450, but is expected to fall to reflect the decline in world oil prices from more than $140 in July to below $40 in recent trading. Gas prices fluctuate more slowly than oil because gas is generally sold under long-term contracts.

Before talks broke down on Dec. 31, Russia had offered Ukraine a price of $250 for 2009, which Ukraine refused.

The two countries also reached a deal Sunday on the price Russia will pay Ukraine for transporting gas to Europe through its pipelines. Ukraine had insisted that if it paid more for gas, Russia should pay market prices for transit.

Previous page 1 2 Next Page