Russia and Ukraine reach agreement on gas prices over winter season

After several months of disagreement over prices, Russia and Ukraine have agreed to resume gas shipments. With $500 million received from the EU, Ukraine can purchase 2 billion cubic meters of gas for the winter.

+ Add Image	1 of 2

The Russian suppliers, Gazprom, warned Ukraine that it could still run out of gas before the end of winter. Negotiations involved the EU commission, Ukraine and Russia. The agreement covers a six-month period from October 1 to the end of March next year. Gazprom's CEO, Aleksey Miller, said he expects Ukraine will start to buy gas at the beginning of October.

The Russian and Ukrainian energy ministers agreed Ukraine would pay a reduced rate of $232 US per 1,000 cubic meters of gas during the period of the agreement. This is a $20 reduction per thousand cubic meters from the earlier price. The EU agreed to allocate $500 million to pay for the gas. The EU Commission said: “The European Commission continues its efforts towards organizing, through European and international financial institutions, the necessary financing for gas purchases by Ukraine during the winter period, as part of which at least 500 Million US $ should be available by the end of this year.” This in turn was made possible by a $1 billion financing deal through the World Bank and other international lending institutions, designed to allow Ukraine to fill its natural gas storage facilities. Ukraine will allow natural gas transit through its territory to the EU under the agreement. Many analysts believe Ukraine will need to purchase more gas, especially if there is a severe winter. Russia suspended natural gas shipments to Ukraine last July when Kiev did not make prepayments for supplies.

The Ukrainian Energy Minister, Volodymr Demchyshyn, said: "I'm sure we will be preparing for the heating season and start pumping gas into storage shortly.Ukraine confirmed in this document its capacity to ensure uninterrupted transit of Russian gas to EU partners." A new gas link through the Baltic Sea from Russia to northern Germany, Nord Stream-2 , will enable Russia to deliver gas to the EU without going through Ukraine. Ukrainian Prime Minister Arseny Yatsenyuk said that Ukraine would lose $2 billion in transit fees as a result. A deal to launch the project was signed recently by Gazprom with several companies including Shell, BASF/Wintershall and others but Gazprom will hold a 51 percent share in the new company called New European Pipeline AG.

Russia agrees to provide coal and electricity for the Ukraine

Putin spokesperson Dmitry Peskov told TASS news that Russia has a new deal with the Ukraine to provide coal and electricity for the Ukraine. The conflict in the east has cut off coal supplies for plants in the rest of the Ukraine.

Peskov claimed that Putin had agreed to the deal as a goodwill gesture and said: "Putin made a decision to start these supplies due to the critical situation with energy supplies and despite a lack of prepayment." The agreement will see Russia supply the Ukraine with half a million tonnes of coal each month according to Deputy Prime Minister Dmitry Kozak. If further agreement is reached it will provide another half million. At present, Ukraine has only 1.5 million tonnes of coal in reserve whereas normally winter stocks reach 4 to 5 million tonnes. 

While normally Ukraine is self-sufficient in providing its electricity, fighting in the coal producing regions of the east has cut off coal supplies to the thermal generating stations. These provide almost 40 percent of Ukraine's electrical power. Kozak also said that he hoped the agreement would resolve problems involving Ukrainian supply of energy to the Crimea. Ukraine blocked all air and bus travel to the Crimea on Friday. The Crimean customs service said that automobile traffic was also stopped at two of three crossings but had resumed by the afternoon. A Ukrainian security official said the measures were temporary. A spokesperson for Ukrainian security Col. Andriy Lysenko claimed that the suspension resulted because "there is a high likelihood of sabotage groups entering under the guise of local people." There were three recent fatal explosions in the south including one in Odessa and another in Kherson just 60 miles north of Crimea. The disruption of transport is certain to anger residents on both sides of the border as this is the busy holiday season. 

On a more positive note, eastern rebels freed another four prisoners including three soldiers after the initial swap of 146 for 222 people held by the Ukraine government. The latest release was in Luhansk