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26 September 2017
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Russia, Ukraine gas price deal relieves Europe

Europe depends on Moscow for around a quarter of its supplies

Ukraine and Russia agreed Tuesday on the price of gas supplies for 2008, defusing a possible dispute like the one that disrupted supplies to the European Union last year, according to AFP.

Russian giant Gazprom said Ukraine had agreed to pay 179.5 dollars (122 euros) per 1,000 cubic meters for gas deliveries following talks between Gazprom CEO Alexei Miller and Ukrainian Energy Minister Yury Boiko.

"The two sides agreed that in 2008 the price of gas crossing the Russia-Ukraine border will be 179.5 dollars," Gazprom said in a statement.

The current price for Russian gas paid by Ukraine is 130 dollars.

"The signing of this agreement guarantees the stability of transit through Ukraine and of supplies to European consumers," Konstantin Borodin, a spokesman for Ukraine`s Energy Ministry, told AFP.

The deal came amid renewed fears over gas exports from Russia to Europe, which depends on Moscow for around a quarter of its supplies, after Turkmenistan last week increased the price of its supplies to Russia.

Russia depends on the Central Asian state of Turkmenistan for a large part of its domestic gas supplies and for part of its exports to Ukraine because it has been slow in developing its own reserves.

EU countries receive almost all their gas imports from Russia via Ukraine.

Analysts said the accord means in effect that the higher cost of gas from Turkmenistan is being transferred directly to Ukraine and then most likely onto Europe.

"It means that Gazprom is now fully able to pass through the higher cost of gas sold from Turkmenistan," said Alexander Burgansky, energy analyst the investment bank Renaissance Capital in Moscow.

"It`s certainly not a guarantee (there will be no dispute) but it`s encouraging that they`ve been able to agree on the terms of gas for 2008 in early December," Burgansky said, referring to the possibility of disruptions to supply.

"It`s a fair price given the price level that Gazprom had agreed with Turkmenistan," he added.

The price for Ukraine had been under negotiation for several weeks. Ukraine said in October that it was hoping to pay 150 dollars per 1,000 cubic metres.

Ukrainian energy analyst Volodymyr Saprykin from the Razumkov Centre for political and economic studies in Kiev played down the price increase.

"It`s a realistic price ... No-one won and no-one lost," Saprykin said.

"Even if the agreement was not reached today but in two weeks time, Europe could sleep easy ... There will be no gas war," he added.

A lawmaker from the Yulia Tymoshenko Bloc, a party set to form Ukraine`s governing coalition, however criticised the deal, saying it was proof of the "incapacity" of outgoing prime minister Viktor Yanukovych.

Russia cut off gas supplies to Ukraine in 2006 after Kiev refused to accept a much higher price for imports. The move subsequently disrupted supplies to European countries further downstream.

In October, Gazprom had announced that it could reduce supplies to Ukraine if Kiev did not pay back a debt of 1.3 billion dollars. That dispute was resolved a few days later.

AFP

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