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Russia, Ukraine to sign gas deal, end standoff
2009-01-19
MOSCOW - The Ukrainian prime minister arrived in Moscow on Monday as Russia and Ukraine prepared to sign a deal ending a contentious dispute that cut off Russian natural gas shipments to Europe for nearly two weeks. Yulia Tymoshenko and her Russian counterpart, Vladimir Putin, reached a preliminary agreement over the weekend to restore gas supplies to Europe and Ukraine. Tymoshenko's office said a formal deal would be signed Monday by Russia's gas monopoly Gazprom and Ukraine's Naftogaz. Naftogaz says it would take up to one and a half days to pump gas to its western border once Russia restarts deliveries. Russia stopped shipping gas to Ukraine for domestic use on Jan. 1 in a dispute over prices. It then halted all gas shipments to Europe via Ukraine on Jan. 7, alleging that Ukraine was siphoning off Europe-bound gas. Ukraine disputed this, claiming that Russia was not sending enough "technical gas" to push the rest further west. The confrontation has deeply shaken Europeans' trust in both Russia and Ukraine as reliable energy suppliers, as more than 15 nations have been forced to scramble for alternative sources of energy. The dispute was further complicated by geopolitical struggles over Ukraine's future and over lucrative export routes for the energy riches of the former Soviet Union. After weeks of frustration and dashed hopes, the European Union responded cautiously to the news. "So far, they have been unable to do it and of course this raises serious concerns about their credibility as our partners," European Commission President Jose Manuel Barroso said Monday. "The proof of the pudding is in the eating, and the proof of the gas is in the flowing," EU spokesman Johannes Laitenberger said. Tymoshenko and Putin negotiated a preliminary deal for Ukraine to get gas with a 20 percent discount from this year's average European price, which Russia says is $450 per 1,000 cubic meters. That would double the price Ukraine paid in 2008. However, natural gas prices for Europe are expected to fall sharply later this year, due to the fall in oil prices. By midsummer, Ukraine could be paying as little as $150 for 1,000 cubic meters, said Ronald Smith, a strategist at Moscow's Alfa Bank. Ukrainian Parliament Speaker Volodymyr Lytvyn said Monday, citing Naftogaz and Russian officials, that the average price Ukraine will pay this year will be around $240 to $250. He did not elaborate. Russia won a key principle, however, that Ukraine must pay more for its energy supplies. Russia also won't have to pay higher transit prices to Ukraine to use its pipelines. Putin said in 2010, Ukraine will have to pay full price for Russian gas, and Russia will pay market prices for transit. In the long term, it is not clear how Ukraine will pay for the huge amount of Russian gas needed to run its outdated factories and heating systems. Opposition leader Viktor Yanukovych said any gas price higher than $250 would be mean a "collapse" of the economy, which is already coping with a collapse of the national currency, a drastic fall in exports and a shaken banking sector. ___ Associated Press writers Yuras Karmanau and Maria Danilova in Kiev, Ukraine, and Aoife White in Brussels contributed to this report.
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