EU energy commissioner Günther Oettinger
EU energy commissioner Günther Oettinger

Kiev and Moscow on Friday agreed the basis of a deal that could restore natural gas supplies to Ukraine and avert the risk of supply disruptions to European states during winter.

Under the framework agreement, which must still be confirmed by national capitals, Ukraine would pay $3.1bn by the end of the year to settle payment arrears. In return, Russia’s Gazprom would supply 5bn cubic metres of gas – for which Ukraine would pay in advance at a price of $385 per thousand cubic metres – with an option of supplying a further 4bncm if required.

Günther Oettinger, the EU energy commissioner who helped broker the potential deal at talks in Berlin, said he believed the “chances are very high that all parties will sign the agreement”.

Russia halted natural gas flows to Ukraine, a major transit route for gas to the EU, in June because of disputes over price and Kiev’s payment arrears. The winter supply deal is designed to be an interim solution, allowing time for the two countries to resolve their broader disputes at an arbitration court in Stockholm, which is due to rule next year.

Concerns had grown in European capitals that a continued gas shut-off to Ukraine could impose huge suffering on Ukrainians and do more damage to the country’s struggling economy, as well as leading to shortages in the EU.

Some politicians and analysts had speculated that Russia was planning to prolong the shut-off to put more pressure on the pro-western government in Kiev, after annexing Crimea this year and backing pro-Russian separatists in eastern Ukraine.

Mr Oettinger said at a press conference in Berlin that if Ukraine’s legal position prevailed in the arbitration court, the payment of $3.1bn would settle the case.

“We believe this is a tangible interim solution to secure gas supplies this winter into next spring,” he said.

The commissioner added that the negotiators, who included Ukraine’s energy minister Yuri Prodan and his Russian counterpart, Alexander Novak, would return to their capitals to seek approval of the deal.

Gazprom has demanded that Ukraine repay debt for past deliveries that it says have now topped $5bn, and introduced a prepayment system in May.

Mr Novak told reporters in Berlin that the details of the framework deal were “to our satisfaction” and “in line with the Russian position”.

“Part of the debt is repaid, and deliveries are paid in advance,” he said, while adding that there were some minor details which required “clarification”.

Mr Prodan was more cautious, however, saying there had been no final agreement on the price that Ukraine would pay for gas in the winter.

Get alerts on Ukrainian politics when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article