In a deal worth around $4.6 billion (£2.87 billion), Russia has agreed to continue supplying Ukraine with gas through the winter period.
Brokered by the European Union (EU), the package sees the EU acting as a guarantor for Ukraine after gas supplies were initially halted for late payments after Russia scrapped subsidies given to Ukraine for importing gas. As such, prices sharply rose and Ukraine fell behind on payments.
However, money from the EU and International Monetary Fund (IMF) along with existing accords meant that gas supplies to Ukraine and other European countries were once again secured with the European Commission saying in a statement:
“Unprecedented levels of EU aid will be disbursed in a timely manner, and the International Monetary Fund has reassured Ukraine that it can use all financial means at its disposal to pay for gas. Further work with the international financial institutions on financial assistance to Ukraine, also in relation to gas supplies, will still continue. But all three sides are reassured that Ukraine will have the necessary financial means.”
With President of the European Commission, Jose Manuel Barroso saying:
“There is now no reason for people in Europe to stay cold this winter, this is an important step for our shared energy security in the European continent.”
The impact of the ban at the time wasn’t considered too dramatic but with the colder winter months drawing in there was a level of urgency about the talks as Ukraine has relied on Russia for around 50% of its gas and Russia providing a third of the EU’s gas. As such, the successful negotiations will come as a relief to all of those involved as Russia was also suffering from EU embargoes.
Those embargoes were put in place because of the ongoing Russia/Ukraine conflict and as such this move could be seen as an easing of hostilities between the two, although it is far too early to really tell yet.
Russia’s Energy Minister Alexander Novak told a news conference that the deal secures supplies for Ukraine and Europe.
“I want to reassure you that Russia has always been a reliable supplier of energy resources to Europe and other consumers. It has been, is and will be a reliable supplier. The autumn and winter period is safe (for Ukraine) and the supply to European consumers is also stable. We are convinced that our future relations will be constructive and that our agreements will be fulfilled.”
As part of the deal Ukraine has guaranteed to pay off any outstanding debts with Russia immediately with $1.45 billion to be paid once the agreement has be signed and a further $1.65 billion by the end of the year. Ukraine will then go on to pay $378 per 1,000 cubic metres to the end of 2014, and $365 in the first quarter of 2015.
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