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. Last Updated: 07/27/2016

Kasyanov: Deal Ends Gas Brawl With Kiev

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Prime Minister Mikhail Kasyanov has announced the signing of a breakthrough agreement with Kiev meant to ease a spat over Ukraine’s siphoning off of Russian gas.

Nevermind that Kasyanov has not yet received Ukrainian Prime Minister Viktor Yushchenko’s signature to seal the accord.

Industry insiders say the deal appears to be as good as signed by both sides and the final paperwork should be signed this week.

Under the deal, Ukraine will allow 111.5 billion cubic meters of gas to flow through its pipelines to Europe. Gas monopoly Gazprom will then supply Ukraine with 29.5 bcm of gas in lieu of the $1.48 billion it would have to pay for transiting that gas through Ukraine.

If Ukraine helps itself to more than the allotted amount, the difference will be charged to its sovereign debt.

The accord also calls for a revamp of Ukraine’s gas debt to Russia, which Russian officials estimate to be $2 billion to $3 billion.

Yushchenko says the figure is closer to $1.4 billion.

That debt will include $700 million that Ukraine owes Russia for this year, and the repayments will be made over an eight- to 10-year period. The actual deadlines for debt payment are to be clarified later, because both sides need to see what burden the payments will have on Ukraine’s budget, Interfax reported.

The agreement should end years of bitterness over Ukraine’s siphoning of gas from transit pipelines by giving Russia a way to bill Kiev, said Stephen O’Sullivan, a gas analyst with United Financial Group.

Additionally, the barter deal for gas will leave Ukraine with less incentive to take gas, he said.

"If Ukraine was paid in cash, then it would spend that money for other purposes and then steal gas," O’Sullivan said.

"At least if they’re paid in gas, they’re less likely to steal more."

While gas analysts applaud the deal, some critics are slamming a stipulation in it calling for 5 bcm of Russia’s natural gas to be set aside in case of an emergency. An emergency would include "actions by branches of the [Ukrainian] government that would make it impossible to fulfill their side of the accord," Yushchenko said earlier this month.

That said, Ukraine has already given itself an excuse not to keep its end of the deal, said Arkady Moshes, of the Institute of Europe.

"It seems that Russia is paying to preserve the illusion of unity among countries formerly part of the Soviet Union," Moshes told Moskovskiye Novosti.

"But would Russian citizens — those who have no heat or light in their homes — agree to this?"

It is unclear what impact the new agreement will have on negotiations for a new $2 billion pipeline to Europe that would bypass Ukraine.

Yushchenko has been quoted in local media as saying he is concerned by the possible loss of revenues from the lucrative transit of gas from Russia.