Russia and Ukraine to sign deal today on gas supply

RUSSIA AND Ukraine are expected to sign a deal today to end a gas dispute that has starved Balkan homes and industry of energy and deeply undermined European Union confidence in the two countries.

Agreement was reached between the uneasy neighbours after marathon talks in Moscow between Russian prime minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko on Saturday.

They announced a breakthrough yesterday morning, after all-night negotiations yielded a deal on how much Ukraine would pay Russia for gas, and how much it would receive from Moscow for pumping the fuel across its territory to Europe.

The European Commission reacted cautiously, however, having seen an apparent deal to restore gas flow collapse last week within hours of its implementation.

“The commission welcomes the announcement in Moscow of Prime Minister Putin and Prime Minister Tymoshenko, and in particular the announcement that gas transit to Europe could be resumed on Monday,” it said in a statement.

“But we have seen many false dawns in this dispute, and the test in this case is whether or not the gas flows to Europe’s consumers. Until that point, the wait goes on for Europe.”

Czech industry minister Martin Riman, whose country holds the EU presidency, also welcomed the apparent deal but said the EU would “remain realistic”.

“Over the past few days we have seen several similarly hopeful moments. The only thing that counts for the EU is the resumption of gas supplies. For the time being it is not clear when this resumption takes place.”

At its worst, the dispute left millions of people in Bulgaria, Serbia and Bosnia without gas heating in temperatures of -20C, forced scores of major factories across eastern Europe to scale back or halt production, and prompted Slovakia and Bulgaria to consider reopening mothballed nuclear power stations.

Russia stopped pumping gas to Ukraine for domestic consumption on January 1st, due to the country’s alleged failure to pay its fuel bills for last year. Moscow then halted all gas exports to the EU via Ukraine, after accusing it of illegally siphoning off the fuel from pipelines that cross its territory.

According to Mr Putin, the new deal envisages Ukraine paying 20 per cent less than the full European market price for Russian gas this year, and the full rate from 2010. Russia will pay the same gas transit fees this year to Ukraine as last year, and move to full European market rates in 2010.

Ukraine has been paying less than half the European market price for Russian gas, and analysts say it will struggle to meet the higher energy bills. International gas prices are set to fall quickly, however, as they track the sharp decline in oil prices.

Industry experts said doubts would remain over the deal until final gas prices and transit fees had been publicly announced, and the future of a shadowy firm that acts as an intermediary in Russia-Ukraine gas trade had been decided.