Shivering Europe waits as Russia and Ukraine end gas dispute

Millions of Europeans were waiting anxiously today for gas supplies to be restored after Russia and Ukraine signed deals to end the bitter dispute that cut off shipments for two weeks.

Millions of Europeans were waiting anxiously today for gas supplies to be restored after Russia and Ukraine signed deals to end the bitter dispute that cut off shipments for two weeks.

The countries normally get about one-fifth of their gas from Russia via Ukrainian pipelines, were given the news they wanted yesterday when Russian prime minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko signed the documents at Mr Putin’s government headquarters on the Moscow river.

An outline agreement was clinched in late-night talks on Sunday with heads of Russia’s state-run natural gas monopoly Gazprom and the Ukraine’s Naftogaz.

“As a result of intensive and lengthy talks we have reached agreement on all issues concerning natural gas supply to Ukraine and its transit to Europe,” Mr Putin said.

He said Gazprom had been instructed to resume shipments bound for Europe that had been halted since January 7 as Moscow and Kiev argued over 2009 gas prices and claims that Ukraine was stealing gas destined for Europe.

Ms Tymoshenko said the gas would be pumped toward Europe as soon as it entered the Ukrainian pipes. But neither official said exactly when the gas would begin flowing.

Officials said the restored gas shipments could take up to 36 hours to cross Ukraine, which is the size of France, and reach European customers.

EU officials were taking a wait and see attitude.

“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 European Commission said.

Europe gets about 20% of its total natural gas needs from Russia via Ukrainian pipelines, and the cut-off hit hard in some countries, such as Bulgaria and Slovakia, that rely almost entirely on Russia for gas.

In the Balkans and other eastern European nations, the crisis has shut factories and left millions of people to shiver in unheated homes.

The confrontation has deeply shaken Europeans’ trust in both Russia and Ukraine as reliable energy suppliers – something each has repeatedly insisted it is, while blaming the other for the supply cut-off.

Before dawn on Sunday, Ms Tymoshenko and Mr Putin negotiated a preliminary deal for Ukraine to get gas with a 20% discount from this year’s average European price, which Russia says is £315 per 1,000 cubic metres. That would double the price Ukraine paid in 2008.

However, natural gas prices for Europe are expected to fall sharply later this year, due to the reduction in oil prices. By mid-summer, Ukraine could be paying as little as £105 for 1,000 cubic metres, said Ronald Smith, a strategist at Moscow’s Alfa Bank.

Russia, meanwhile, will not have to pay Ukraine higher transit prices to use its pipelines this year. Mr Putin said in 2010 Ukraine would have to pay full price for Russian gas and Russia would pay market prices for transit.

More in this section

IE_logo_newsletters

Select your favourite newsletters and get the best of Irish Examiner delivered to your inbox