Russia, Ukraine sign 10-year deal on gas flow

Russia and Ukraine have signed a 10-year deal aimed at renewing Russian gas supplies to Ukraine and Europe, potentially putting an end to a dispute over payments that cut off gas deliveries to parts of Europe in the middle of winter.



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AFP - Russia and Ukraine on Monday announced they had resolved the gas dispute that cut supplies to a swathe of European countries, saying deliveries would resume "soon."

But the European Union demanded to know exactly when natural gas flows would be restored after a crisis that left millions of people in eastern and central Europe without heating in the depths of winter.

And sharp criticism of the deal from the office of Ukrainian President Viktor Yushchenko indicated that his long-running political feud with Prime Minister Yulia Tymoshenko -- who signed the accord alongside Russian counterpart Vladimir Putin -- would likely colour the issue for some time yet.

The two sides put pen to paper on a 10-year agreement to provide Russian gas for the Ukrainian market and said all disagreements on transit to the EU had been resolved.

Russian energy giant Gazprom "has received an order to start supplies of gas on all routes proposed by our Ukrainian partners and in full volume. The company is ready to fulfil the daily requests of its European consumers," said Putin.

"I expect supplies of all Russian gas to Europe to be fully restored soon," he added at the signing ceremony in Moscow.

Tymoshenko said: "We will allow the transit as soon as the gas enters Ukraine's gas pipelines. There won't be any delay.

"We expect the Russian side to start deliveries of gas to the countries of the European Union in a matter of hours," Tymoshenko said.

The Ukrainian premier called Monday's agreement "historic" and said it would prevent future year-end gas crises.

"That is a formula-based approach which excludes any subjective elements and gives reason to believe there won't be year-end debates in future years, won't be any falling out, but will be a normal, absolutely predictable process of price-setting for gas and tariffs for transportation," she said.

She also said the two sides would drop all claims against each other for losses incurred during the dispute, in which Russia says it has lost almost a billion dollars.

Putin confirmed a 20 percent discount for Kiev on what Russia regards as "market prices."

Tymoshenko indicated Ukraine would pay in the region of 230-250 dollars per 1,000 cubic metres for its domestic needs, but said the actual price would be revealed in a few days.

The crisis erupted on January 1 when Russia cut gas to Ukraine's domestic market over unpaid debts and demands for a higher price in 2009. The dispute escalated when Moscow halted all supplies for Europe transiting through Ukraine, accusing Kiev of stealing gas.

The agreement came as the EU grew increasingly exasperated at the shutdown of the main transit route for Russian supplies to the bloc, which had led to heating cuts and factory shut-downs across a swathe of countries.

"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 EU's executive arm, the European Commission, said in Brussels.

Czech Industry Minister Martin Riman, whose country holds the EU's presidency, warned: "If the deliveries don't resume despite such strong declarations by the Russian and Ukrainian prime ministers, there will be a total crash in the confidence of EU consumers, citizens and the enterprise."

The crisis in supplies from Europe's main foreign gas supplier has forced a reconsideration within the 27-nation bloc of its dependence on Russia and quick fixes to reorient pipeline routes to keep European industries working.

Russia's President Dmitry Medvedev voiced confidence that the agreement would receive Yushchenko's approval, but the latter's energy adviser was quick to criticise the deal's terms.

Bohdan Sokolovsky said that by agreeing to pay higher rates for Russian gas this year without increasing the amount it charges Russia for gas transit to Europe, Ukraine would be "subsidising" Russian state energy firm Gazprom.

"We are giving Russia a more than 60 percent discount on transit to Europe.... We will be subsidising Gazprom," he told Interfax news agency.

Russian newspapers also expressed doubts. The Kommersant daily, referring to the Tymoshenko-Yushchenko feud, said: "The risk of an escalation of the conflict cannot be ruled out until the new scheme is approved by... Yushchenko."

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