Ukraine-Russia Gas Talks

Ukraine-Russia Gas TalksUkraine-Russia Gas Talks

High-level talks in Brussels involving Russia, Ukraine and the European Commission are expected to clinch a deal late on Friday to secure winter gas supplies for Ukraine.

Against that backdrop, Moscow and Kiev have been haggling over gas prices and in the latest flare-up, Moscow in July cut off supplies to Kiev, Reuters reported.

The commission and the Russian Energy Ministry said they were optimistic that both Moscow and Kiev were ready for a deal.

Tensions between Moscow, Europe’s biggest gas supplier, and Kiev, the main transit route to the EU, have been high over the Ukraine crisis since 2014.

Appetite for an agreement has increased on all sides as Gazprom fights to defend market share in Europe and storage levels have started to fall in the EU, which relies on Russia for roughly one third of its gas, around half of which transits Ukraine.

Figures from Gas Infrastructure Europe show gas stocks are around 80% full across the 28 EU states, 3% below a year ago in the runup to what proved to be a mild winter.

Although officials said the framework of a deal was in place following bilateral talks earlier this month, a sticking point has been over who will pay, as well as the price. EU sources say Germany and the European Commission could provide some funds.

Ukraine has said an acceptable price would be $220 per 1,000 cubic meters. Gazprom has said its average 2015 price for EU companies with long-term deals is $235-$242 per tcm.

Russia on Friday signed a decree setting the price for Ukraine, saying only it was equal to those for EU nations that border Ukraine.

A long-term 10-year contract between Russia and Ukraine was reached in 2009 after a previous pricing war led to supply cuts to Ukraine and a subsequent dwindling in volumes for the EU.

The cutoffs to Ukraine in 2014 and this year have not so far led to knock-on supply disruptions and the European Commission has said it expects Ukraine to remain a reliable transit route.