Ukraine gas supply talks end with tentative deal, no signature

Russia, Ukraine and the European Commission initialled but failed to sign a deal on Friday to secure winter gas supplies for Kiev.

Brussels: Russia, Ukraine and the European Commission initialled but failed to sign a deal on Friday to secure winter gas supplies for Kiev.

Tensions between Russia, Europe`s biggest gas supplier, and Ukraine, the main transit route to the EU, have been high since Moscow`s seizure of Crimea in March 2014.

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.

After five hours of talks in Brussels on Friday, European energy chief Maros Sefcovic told reporters the technical details were agreed, but it would require "further procedures" before the deal could be signed.

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.

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

Ukraine has said that $220 per 1,000 cubic metres (tcm) was an acceptable price. Gazprom has said its average 2015 price for EU companies with long-term deals is $235-$242 per tcm.

Ukraine`s energy firm Naftogaz meanwhile said Russia`s terms offered the basis of an interim solution, but it needed to be underpinned by a signed, binding deal.

Under the initialled accord, which runs from Oct. 1 until the end of March next year, Kiev commits to buying 2 billion cubic metres (bcm) of gas from Gazprom, which will be financed with $500 million provided by international financial institutions.

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 cut-offs 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.

Russia, however, has been seeking to bypass Ukraine. Earlier this month, it signed a shareholders` agreement on an expansion of the Nord Stream pipeline that carries Russian gas straight to Germany.

Ukraine draws on gas in underground storage to safeguard its own supply in winter and ensure there are no disruptions to the transit of gas across the country to EU clients.

It had built up 14.9 billion cubic metres (bcm) of gas in underground storage as of Sept. 11 and wants to store 18-19 bcm for winter by mid-October.

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