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EU, Russia, Ukraine seal breakthrough gas accord

Update: October, 31/2014 - 14:02

BRUSSELS (VNS) – Russia has agreed to resume gas deliveries to war-torn Ukraine through the winter in an EU-brokered, multi-billion dollar deal signed by the three parties in Brussels.

In a hard-fought accord the EU hopes will ease the broader crisis over Ukraine, Russia on Thursday agreed to ensure supplies until the end of March.

"I'm glad that political responsibility, the logic of co-operation and simple economic sense have prevailed," EU Commission chief Jose Manuel Barroso told a press conference.

He hailed the end of a bitter gas dispute that saw Russia cut supplies to Ukraine in June, insisting Kiev pay for deliveries up front.

"There is no reason for people in Europe to be cold this winter," Barroso said, referring to fears that Russia could have turned the Ukraine taps off, disrupting onward supplies to many European Union countries.

Ukraine Energy Minister Yuri Prodan said the "decisions taken today will provide energy security for Ukraine and the EU."

The deal caps two days of marathon talks that had stalled before dawn on Thursday when Russia demanded that the EU first agree with Ukraine how to pay Kiev's outstanding bills and finance gas deliveries through to March.

"The European Commission must reach an agreement with Ukraine over the question of financing," a spokesman for Russian gas giant Gazprom said in Moscow earlier. "Otherwise, negotiations make no sense".

In Kiev, Prime Minister Arseniy Yatsenyuk said he would ask the United States and Germany for "additional financial instruments for Ukraine that would help stabilise the budget and pay our energy bills."

Deal a 'real breakthrough'

EU Energy Commissioner Guenther Oettinger called the deal a "real breakthrough" that was reached with cool heads against the backdrop of a seven-month war in eastern Ukraine pitting Kiev against pro-Moscow rebels.

"This is perhaps the first sign of a well-working neighbourhood policy. It is a good message," Oettinger said.

He said the terms of the agreement confirmed the tentative outlines of one he reached earlier in the month whereby Ukraine would pay $3.1 billion by the end of the year to settle a large portion of its outstanding bills to Russia.

In return, Russia agreed a base reference price for deliveries through to March 2015 of $385 (302 euros) per 1,000 cu.m, a discount of about US$100.

In practice, depending on market conditions and the amounts involved, the prices will likely be slightly lower.

The EU gets about a third of its gas from Russia, of which around half transits via Ukraine, a former Soviet bloc country.

The EU was seeking to avoid a repeat of 2006 and 2009 when Russia halted supplies to Ukraine, disrupting deliveries onwards to Europe during two very cold winters.

In June, several months after the Ukraine crisis began, Russia cut supplies again, demanding that Kiev settle its outstanding bills and pay up front for any future deliveries.

"We are convinced that our future relations will be constructive and our agreements fulfilled," Russian Energy Minister Alexander Novak said after the deal.

Gazprom spokesperson Sergey Kupriyanov issued a statement saying: "This is hopefully the start of a new, more constructive chapter in gas relations among the EU, Russia and Ukraine." — AFP

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