Gazprom Restores Gas to Ukraine

APTymoshenko, seen speaking in Kiev on Wednesday, has pushed for Gazprom to sell gas directly to Naftogaz Ukrainy.
A three-day standoff that saw gas shipments to Ukraine cut in half ended Wednesday when Russia reached an agreement with the important energy-transit state.

While Ukrainian state energy company Naftogaz Ukrainy and Russia's Gazprom both said the conflict over payments for past shipments had been resolved, analysts said the deal brought no guarantee that supplies would not be interrupted again in near future.

The companies said the agreement followed a telephone conversation between President Vladimir Putin and his Ukrainian counterpart Viktor Yushchenko.

"The transport of Russian gas to European consumers across the territory of Ukraine is being carried out in full," the companies said. "Restrictions on the deliveries to Ukrainian consumers have been removed."

Gazprom CEO Alexei Miller and Naftogaz chairman Oleh Dubyna agreed that Naftogaz would pay for gas deliveries made from Jan. 1 to March 1, in accordance with the "arrangements already in place for early 2008," the companies said, without providing any more information.

The announcement came hours after Gazprom warned European customers that Ukraine was getting ready to cut supplies to Europe.

Earlier Wednesday, Ukrainian Prime Minister Yulia Tymoshenko said Ukraine wouldn't disrupt gas flows to Europe.

Yushchenko, who has generally taken a more conciliatory stance in dealings with Gazprom than his prime minister, congratulated the companies on the agreement Wednesday evening.

"I am not a proponent of a gas war. I am a proponent of dialog," Yushchenko said in a statement posted on his web site. "I am convinced that we have to be less emotional and should abide by pragmatic national interests."

While a cut in supply to Europe no longer seemed an imminent danger, details as to how the impasse had been resolved were in short supply.

Gazprom spokeswoman Tatyana Golubovich said Wednesday that the company had agreed to a price of $179.50 for gas delivered from Jan. 1 to March 1 but that negotiations over pricing with Naftogaz would continue. Kupriyanov and Naftogaz spokesman Valentin Zemlyansky were not available for additional comment Wednesday night.

"Gazprom has apparently agreed to consider the 1.9 billion cubic meters of gas sold to Ukraine in January as originating in Turkmenistan," Mikhail Korchemkin, executive director at Pennsylvania-based consultancy East European Gas Analysis, said in e-mailed comments.

The latest blow up between the two sides came on the heels of an agreement last month between Yushchenko and Putin to settle Ukraine's debt and replace the two companies currently handling the trade with new entities.

That deal stipulated the $179.50 price, while offering Gazprom more access to Ukrainian consumers through one of the two new intermediate companies.

Last week, however, Gazprom said Ukraine had not paid for any of the gas it had received so far this year. Naftogaz admitted that it owed the money but said it had not received proper contracts from the intermediary traders.

Gazprom claims that Ukraine owes it $600 million for 1.9 billion cubic meters of Russian gas shipped to Ukraine since the beginning of January.

Geoffrey Smith, deputy head of Ukrainian research at Renaissance Capital in Kiev, said the agreement seemed a stopgap measure designed to prevent the disruption of supplies flowing West.

"Causing a serious disruption to the gas supplies to Europe is not in either side's interest," Smith said.

But he added that other serious issues remained unresolved, including the payment dispute for 2007 between UkrGazEnergo and Naftogaz and the "future division of spoils in the Ukrainian domestic market."

"The Ukrainian government wants as large a slice of the pie for Naftogaz as possible because the firm is in a parlous financial position," he said.

The joint statement from Naftogaz and Gazprom said they would continue talks on cooperation in other areas.

Staff Writer Max Delany contributed to this report.