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Gas flow to resume after Moscow meet

— Photo: AP

Paralysing weather: Workers saw logs for heating in Zagreb, Croatia, before the Russian-Ukraine pact in Moscow on Sunday.

MOSCOW: Russia and Ukraine have agreed on the price of natural gas for Ukraine in 2009, resolving the three-week standoff that left much of Europe freezing in the heart of a cold winter.

Under a deal reached by Prime Ministers of Russia and Ukraine, Vladimir Putin and Yulia Tymoshenko, in the early hours on Sunday, Ukraine will henceforth pay the European price for Russian gas supplies, but will get a 20-per cent discount in 2009 in exchange for agreeing not to hike a reduced transport fee for Europe-bound gas that it charged Russia last year. However, beginning with 2010 Russia will pay market prices for transit.

The deal opens the way to the resumption of Russian gas shipments to Europe that were disrupted on January 7 as the dispute between Moscow and Kiev escalated to a full-fledged gas war. Nearly 20 European countries suffered a partial or total cut off of gas supplies.

Ukraine, which earlier rejected the Russian price offer of $250 per 1,000 cubic metres of gas, will now pay about $360 in the first quarter of 2009 before gas prices will decline following the slump in the price of crude. Last year, Ukraine paid $179.5 per 1,000 cubic metres of Russian gas.

By applying the European gas pricing formula to Ukraine, Russia reduces the risk of future gas disputes with Kiev that cost Russia’s gas monopoly Gazprom over $1 billion in lost revenues since January 1 when it halted gas sales to Ukraine.

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