Russia relaxed demands on Ukraine for importing gas in 2010 and agreed on Tuesday to waive fines on this year`s supplies in a deal easing European fears of a renewed dispute along a route supplying a fifth of its gas, according to Reuters.
Gazprom (GAZP.MM), Russia`s powerful state-run gas export monopoly, agreed that Ukraine -- whose economy has been crippled by the global financial crisis -- could buy 35 percent less gas than originally contracted for next year.
"The volumes have been corrected in accordance with actual consumption in Ukraine in conditions of crisis," Gazprom Chief Executive Alexei Miller said after four hours of talks with Oleh Dubyna, the head of Ukrainian state energy firm Naftogaz.
"These volumes remove the risk of the payment of fines by Naftogaz Ukraine in 2010 for the non-use of contracted gas." Russian gas to Europe via Ukraine was cut off for three weeks in January after the ex-Soviet states argued over pricing and transit, a dispute that shook confidence in Russia`s ability to supply gas and Ukraine`s ability to give it safe passage.
Europe is concerned the dispute, which damaged industry and left hundreds of thousands in the cold, could flare up again at New Year, especially as rival political factions in Ukraine jostle for support ahead of a Jan. 17 presidential election.
Russian Prime Minister Vladimir Putin, whose often fierce rhetoric has worried European consumers, has said existing gas deals with Ukraine were a guarantee of stable energy supplies but has also warned Ukraine not to siphon gas meant for Europe.
His earlier pledge to Ukrainian Prime Minister Yulia Tymoshenko that Russia would waive fines for under-consumption of gas this year were formalised in Tuesday`s agreement between Gazprom and Naftogaz, both companies said in a joint statement.
"We secured final agreement that Gazprom will not charge fines for the non-use of 13 bcm of gas in the first 10 months of 2009," Miller said.
Putin and Tymoshenko, a front-runner in the Ukrainian presidential election, laid the groundwork for Tuesday`s deal when they agreed at a Nov. 19 meeting in Yalta to cut the amount of gas Ukraine must take next year.
Naftogaz agreed to purchase 33.75 billion cubic metres of gas (bcm) from Gazprom in 2010, both companies said in the joint statement. This was less than the 52 bcm agreed by the two countries in January.
"Considering the way the financial crisis has affected our country, we have taken considerably less gas than contracted this year and we made this request to our partners," Naftogaz head Dubyna said. "We have found understanding on this issue."
Ukraine had already been lobbying for a reduction. Tymoshenko has said she wanted to import between 27 and 33 bcm next year, depending on the economic situation in her country. [ID:nL3432316]
Though Ukraine has so far settled all its monthly gas bills on time, Tymoshenko has conceded this has been a struggle. Russian leaders have also accused her of political infighting with her rival, President Viktor Yushchenko, and of disrupting the process.
Gazprom said 80 percent of contracted gas volumes were subject to "take or pay" conditions -- meaning Ukraine would have to pay for the gas regardless of whether it was used.
Ukraine purchased 18.85 bcm of gas from Russia in the first 10 months of this year, only 59 percent of contracted volumes of 31.7 bcm for the period, a decline in consumption attributable to the global economic crisis, Gazprom said.