Russia and Ukraine settle gas row - for now

Russian gas supplies to Ukraine have been fully restored. The state-run energy giant Gazprom says the dispute over debt payments has been settled. The company cut supplies to Ukraine by half earlier this week, claiming the country had failed to pay $US600

The quarrel between Russia and Ukraine threatened to spill over into Western Europe. Early on Wednesday Ukraine’s Naftogaz sent a telegram to Gazprom, saying that supplies to European consumers would be cut by 60 million cubic metres during the day.

European consumers may have nothing to do with it, yet their interests have been used as a negotiating tool. About 80 per cent of Russian gas supplies to Europe go through Ukraine, which gives Kiev leverage in negotiating the price for itself.

After a couple of warm and sunny days, a cold spell has once again gripped Moscow and Gazprom’s relations with its Ukrainian counterpart. And the colder it gets, the more gas is consumed and the more difficult it becomes to weather this storm without losses.

An unusually cold winter in Central Asia helped heat up this row. Due to a fall in exports from Turkmenistan and Kazakhstan, Ukraine has been receiving a larger amount of more expensive Russian gas. But, for more than two months, it hasn’t paid the bills.

Ukrainian Prime Minister Yulia Timoshenko says that’s because no contracts were signed.

“Everybody understands that Ukraine is being forced into the most unfavourable gas supply agreement these days. But I’m sure that this time Ukraine will withstand the pressure and will produce a long-standing solution,” Timoshenko said.

So far, European countries have tried to distance themselves from the dispute. William Ramsay, Deputy Executive Director at the International Energy Agency, said cutting supplies is not the way to solve the row.

“What we are saying is there are gas contracts between European consumers and Russia, and it’s important for Russia and Ukraine to keep their commercial disputes out of the pipes of the downstream customers,” Ramsay told RT.

On Wednesday the two sides said they had reached a tentative agreement. Gazprom spokesman Sergey Kupriyanov said all restrictions on Ukraine have been lifted.

“Gas delivered from January 1 to March 1, 2008, will be fully documented and paid for by Ukraine after a scheme effective as of the beginning of this year. Transit or Russian gas to Europe through Ukraine is unaffected. Restrictions on gas deliveries to Ukrainian consumers have been lifted,” Kupriyanov said.

But the devil is in the detail.  Precisely how much Ukraine will be paying for Russian gas will be decided by a joint task force expected in Moscow in the coming days.  So, while the dispute may have been settled temporarily, it has by no means been resolved.