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26/09/2016

Ukraine and Russia sign 3-month gas agreement

Europe's East

Ukraine and Russia sign 3-month gas agreement

Oil pipeline, Ukraine. [Shutterstock]

Ukraine has signed a new agreement to buy Russian gas over the next three months for $248 per thousand cubic metres, after paying $329 in the first quarter of this year, under the recently expired ‘winter package’, the Ukrainian energy ministry said today (2 April).

The agreement represented a “victory” for an economic approach to relations between Naftogaz and Gazprom over a political one, Energy Minister Volodymyr Demchyshyn was quoted as saying on his ministry’s website.

On Wednesday (1 April), the EU urged Ukraine to accept Russia’s 31 March offer to extend the current gas deal with Kyiv by another three months, saying it bodes well for an agreement for next winter.

>> Read: Putin extends gas discount to Ukraine for three more months

Naftogaz had sought a year’s extension to the current winter package, which was confirmed in October, against the backdrop of Kyiv’s war with pro-Moscow rebels in eastern Ukraine, and which expired at midnight on Tuesday.

Moscow’s offer was “good and welcome”, said Anna-Kaisa Itkonen, a spokeswoman for the European Commission, which is brokering the Ukraine-Russia gas talks.

“The Commission encourages the Ukrainian authorities and Naftogaz to seize this opportunity to the largest extent possible,” she said in a statement.

Itkonen said the offer would allow Naftogaz to begin replenishing its storage facilities and “start preparing for the next winter season”.

Cash-strapped Ukraine has been pre-paying for Russian gas, as required by the October agreement, but only in installments of a few days at a time.

The European Union receives about a third of its gas from Russia, with half that amount transiting via Ukraine pipelines.

Stocks in Ukraine, which produces some of its own gas and receives other supplies from eastern Europe, amounted to 7.7 billion cubic metres on 31 March, according to Gaz Infrastructures Europe.

But EU officials say Russian gas imports are needed to replenish 20 billion cubic metres of reserves, the quantity necessary to secure both supplies for Ukraine and the transit of gas to EU countries through next winter.

Talks between Russia, Ukraine and the European Union are set to resume in Berlin in mid-April.

Last month, the EU set June as a target for a new deal lasting until the winter of 2015-2016, but Itkonen said the Russian interim offer was “a positive signal” for the ongoing three-way talks.

“The aim of the trilateral negotiations is to find a solution for the entire winter season 2015/2016,” she said.