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Russia, Ukraine, EU Reach Gas Transit Deal

Ukrainian Prime Minister Yulia Tymoshenko and her Czech counterpart, Mirek Topolanek, meet in Kyiv.
KYIV/MOSCOW (Reuters) -- Ukraine, Russia, and the European Union struck a monitoring agreement on January 11 that should enable the resumption of Russian supplies to Europe, large parts of which have been plunged into a midwinter energy crisis.

Officials said monitors would begin work within hours to oversee gas flows via Ukraine to Europe, cut off last week amid a price dispute between Kyiv and Moscow and Russian accusations that Ukraine was "stealing" gas.

"We were able to reach a political agreement aimed at getting out of the deadlock ... Ukraine has accepted all the terms needed for Russia to supply gas," said Czech Prime Minister Mirek Topolanek, representing the EU Presidency.

Some experts say it could take something like 36 hours from the time gas starts flowing for capacity to build up in pipelines so that supplies reach consumers in Europe, which relies on Russia for one-quarter of its gas needs.

After getting Russia's signature on January 10, Topolanek traveled to Kyiv to persuade Ukraine to sign the deal to allow European Union, Ukrainian, and Russian observers to monitor gas flows across Ukrainian territory.

The agreement, sealed in the early hours of January 11, applied only to Russian gas passing through Ukraine for European consumption. Russia and Ukraine have not reached agreement on supplies to Ukraine and they remain cut off.

The deal is designed to assuage Russian fears that Ukraine is siphoning off fuel for its own use. Kyiv denies the charge.

Asked when Russian gas supplies would resume, Topolanek told reporters: "According to the agreement, Russia will start supplying gas when the [monitors] have been deployed."

Ukrainian Prime Minister Yulia Tymoshenko said: "We signed the protocol today to show that Ukraine is not an obstacle for Russian gas sent. This protocol envisages also the entry of experts on Russian territory to observe gas supplies from the Russian side."

"As soon as the mechanism of control starts working, we will send the gas to the system. If we see that it is stolen again, we will again cut flows," Russian Prime Minister Vladimir Putin said after talks with Topolanek in Moscow.

European Shivers

The dispute, which began when Russia and Ukraine could not agree on this year's gas prices, has led to the worst disruption of Russian gas supplies to Europe.

Eighty percent of Russian gas to Europe is piped through Ukraine.

Eastern and Central Europe have borne the brunt of the dispute, which has shut down factories and left tens of thousands of households shivering in subzero temperatures without heating. Supplies to 18 countries have been disrupted.

Despite clearing the deal, Putin showed no sign of easing his tough rhetoric on Ukraine.

"Our actions do not aim to worsen but rather to improve the situation in Ukraine, to help Ukraine get rid of crooks and bribe-takers and make its economy more transparent," he said.

Putin said in addition to monitors from Russia, Ukraine and the EU, specialists from European gas firms would join the teams checking flows across Ukraine, something Kyiv has opposed.

He said Topolanek had also asked to include specialists from Norway.

Relations between Moscow and Kyiv, already tense because of Russian opposition to Ukraine's push to join NATO, have suffered a further sharp downward lurch.

Russia has accused Ukraine of corruption and stealing gas meant for Europe, and Kyiv said Russia's actions amounted to blackmail to extract an unjustifiably high price for the gas it sells to Ukraine.

Sources close to the talks, speaking on condition of anonymity, said the agreement signed in Moscow had been tweaked slightly at Russia's request, but had not changed substantially from an earlier draft.

Russia, which cut off supplies to Ukraine on New Year's Day because of the dispute over pricing and debts, has repeatedly said Kyiv must pay the going market rate for gas.

Oleh Dubyna, chief executive of Ukrainian state energy company Naftohaz, returned from Moscow on January 10 having failed to agree a 2009 gas supply deal in the latest round of talks with Russian gas export monopoly Gazprom.

"Unfortunately the talks with Gazprom have finished with nothing," Dubyna told reporters at Kyiv airport on his return. "The talks now have to proceed at a higher level."

Dubyna said Gazprom had again demanded a price of $450 per 1,000 cubic meters of gas, which he said Ukraine could not accept. Naftohaz has previously insisted on a price of $201, up from $179.50 in 2008.