Russia Agrees to Terms With Ukraine Over Gas Supply

By Daryna Krasnolutska, Elena Mazneva and Ewa Krukowska  

Russian Energy Minister Alexander Novak, second left, and Ukraine's Energy and Coal... Read More

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Russia agreed to terms for restoring natural-gas exports to Ukraine, laying the groundwork to prevent residents going without heat as temperatures drop.
The gas negotiations, brokered by the European Union, came as pro-Russian rebels stepped up attacks on Kiev government forces. They violated the wobbly truce 45 times in the past 24 hours, the Defense Ministry said on Facebook today. One civilian was killed by shelling, the Donetsk city council said on its website. European leaders said they hoped the agreement would help mend ties between the two countries.
“This breakthrough will not only make sure that Ukraine will have sufficient heating in the dead of the winter,” European Energy Commissioner Guenther Oettinger told a n
ews conference in Brussels last night. “It is also a contribution to the de-escalation between Russia and Ukraine.”
The 28-nation EU sought to avoid a repeat of 2006 and 2009, when disputes between the former Soviet republics over gas debts and prices led to fuel transit disruptions and shortages across Europe amid freezing temperatures.
Tensions remained even as the sides made progress on fuel supplies. The EU yesterday rebuked Russia for an announcement by Foreign Minister Sergei Lavrov that the country would recognize separatist elections planned for Nov. 2 in Ukraine’s rebel-held territories. The conflict in east Ukraine has killed at least 3,700 people, the United Nations estimates.

Gas Drops

U.K. gas for December fell the most in more than a month, sliding as much as 2.7 percent to 54.08 pence per therm ($8.60 a million British thermal Units) on ICE Futures Europe in London.
The yield on Ukraine’s dollar-denominated bonds due in 2017 dropped one basis point to 13.46 percent by 9:46 a.m. in Kiev. The yield rose 10 basis points yesterday in the first increase in 10 days. The hryvnia was trading little-changed at 13 per dollar, according to data compiled by Bloomberg.
Under yesterday’s agreement, Russia said it would resume sending natural-gas to Ukraine -- halted since June -- after receiving the first tranche of debt repayment and upfront payments for future deliveries.
Ukraine agreed to pay $3.1 billion to Russia by the end of this year to partially cover what Russia estimates is $5.3 billion owed by NAK Naftogaz Ukrainy to OAO Gazprom. (OGZD) The first tranche, $1.45 billion, will be paid “in the coming days,” Russian Energy Minister Alexander Novak said.

Ukrainian Payment

Ukraine has funds to pay for 4 billion cubic meters of gas purchases in November and December, Ukraine Energy Minister Yuri Prodan said. The EU and the International Monetary Fund will help Ukraine make payments, Oettinger said. The EU depends on Russian gas piped across Ukraine to meet about 15 percent of its demand.
Tensions between the two countries are hindering efforts to install a new Ukrainian government to steer the nation of more than 40 million people as it struggles with the seven-month insurgency in the east and its worst recession since 2009.
The country’s economy shrank 5.1 percent in the third quarter from a year earlier, the most in about five years, the state statistics office said yesterday.

Stop Tussling

Russia urged Ukrainian politicians to stop tussling over who should lead coalition talks after Prime Minister Arseniy Yatsenyuk’s and President Petro Poroshenko’s parties finished neck-and-neck at the top of voting lists in Oct. 26 parliamentary elections.
The U.S. and the EU blame Russian President Vladimir Putin’s government for instigating the conflict. While Russia denies involvement, it will recognize elections rebel-held in the Donetsk and Luhansk regions, Lavrov said in an Oct. 28 interview with Izvestia newspaper. His ministry said in a statement that Russia thought tensions would ease after last week’s ballot, but that wasn’t happening.
The EU said Lavrov’s comments would exacerbate the conflict and undermine a cease-fire agreed on Sept. 5.
“We deplored the comments made by Russian Foreign Minister Lavrov regarding the forthcoming elections on the territory of the self-proclaimed Luhansk and Donetsk People’s Republics,” Maja Kocijancic, spokeswoman for EU foreign-affairs chief Catherine Ashton, said yesterday. “It would disrupt progress that would lead to the finding a sustainable political solution.”

Pro-European Parties

Pro-European parties may have won enough seats in Kiev for a two-thirds constitutional majority, defeating Russian-leaning political forces.
Yatsenyuk said he should lead coalition talks rather than the president after results showed his party led the Poroshenko Bloc 22.16 percent to 21.82 percent, with 99.53 percent counted of the party-list voting that makes up half of the legislature, according to the Central Electoral Commission.
Party representatives will hold talks today, Poroshenko’s party said in a statement, adding it was willing to speak with other pro-European parties in forming a coalition.