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Russia and Ukraine reach gas deal

(Agencies)
Updated: 2009-01-18 19:59

But Putin said Sunday that Russia offered Ukraine the "20 percent discount" on the condition that the discounted transit price remain in place for 2009. Beginning on Jan. 1, 2010, however, Ukraine will pay full price for gas and Russia will pay market prices for transit, he said.

Russian Prime Minister Vladimir Putin, left, and Ukrainian Prime Minister Yulia Tymoshenko, right, are seen during their meeting in Moscow, Saturday, Jan. 17, 2009. A Kremlin conference Saturday on the gas crisis gripping Europe failed to bring an agreement to restore supplies of Russian natural gas via Ukraine. [Agencies]

Russia currently pays $1.7 to transport 1,000 cubic meters of gas for 100 kilometers (62 miles), which last year amounted to close to $3 billion. Putin has said the market price is about double this.

Related readings:  Russia, Ukraine PMs reach gas deal: official  Russia sets stage for gas crisis summit  Kremlin snubbed as Russia, Ukraine plan gas crisis talks  EU premiers plead with Ukraine, Russia for gas

The global economic crisis has hit Russia hard. With the dramatic fall in the price of oil, the country's main source of revenue, Russia is facing a budget deficit this year for the first time in a decade. Industrial production has slowed and the ruble has come under huge pressure, losing nearly 30 percent of its value since the summer.

Ukraine's economy, however, is in much worse shape. It has been battered by the drop in world prices for steel, the heart of its export-oriented economy, and is heading into a painful recession this year.

Ukraine is heavily dependent on Russian gas and it is not clear how it will manage to pay for the huge amount needed to run its outdated heavy industries and heating systems.

Putin and Tymoshenko made no mention of the more than $600 million that Gazprom claims Ukraine still owes for 2008 supplies.

Russia stopped shipping gas to Ukraine for domestic use on Jan. 1 when the countries could not agree on a price. It then accused Ukraine of siphoning off gas bound for Europe and turned off the taps entirely on Jan. 7.

Russia resumed piping a limited amount of gas toward Ukraine on Tuesday after the EU secured a deal for its monitors check flows, but the gas did not reach Europe. Russia says Ukraine is blocking shipments to European consumers, while Kiev says Russia wants to send gas along a route that would disrupt supplies to Ukrainian consumers.

Geopolitical struggles over Ukraine's future and export routes for the energy riches of the former Soviet Union underlie the commercial dispute.

Russia and Ukraine have been at odds since the 2004 Orange Revolution brought Yushchenko to power. His avid push for Ukraine to join NATO and the EU has angered Moscow.

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