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With Political Rift Still Deep, Russia-Ukraine Gas Deal Is Widely Seen as a Patch With Political Rift Still Deep, Russia-Ukraine Gas Deal Is Widely Seen as a Patch
(35 minutes later)
OTTAWA — A deal struck on Thursday to restart Russian natural gas supplies to Ukraine will keep homes heated this winter, but it does not fully settle a fierce, long-running fight over energy prices that is likely to resume early next year if not sooner, analysts said Friday.OTTAWA — A deal struck on Thursday to restart Russian natural gas supplies to Ukraine will keep homes heated this winter, but it does not fully settle a fierce, long-running fight over energy prices that is likely to resume early next year if not sooner, analysts said Friday.
More crucially, though, the grudging acceptance of the deal did not signal an imminent end to the deeper political dispute over eastern Ukraine. That standoff has brought Russia and the West into their most dangerous conflict since the Cold War and spawned the bloodiest violence in Europe since the conflicts in the Balkans of the 1990s.More crucially, though, the grudging acceptance of the deal did not signal an imminent end to the deeper political dispute over eastern Ukraine. That standoff has brought Russia and the West into their most dangerous conflict since the Cold War and spawned the bloodiest violence in Europe since the conflicts in the Balkans of the 1990s.
The agreement was reached after Europe brokered a payment of more than $3 billion in past-due bills to Gazprom, the Kremlin-controlled energy giant — and after each side bowed to financial realities.The agreement was reached after Europe brokered a payment of more than $3 billion in past-due bills to Gazprom, the Kremlin-controlled energy giant — and after each side bowed to financial realities.
“What I am hearing is, ‘O.K., for the sake of getting some gas into Kiev, we’re prepared to make some temporary arrangements,’ and the key word on both sides appears to be ‘temporary,’ ” Thane Gustafson, a professor of political science at Georgetown, said in an interview on Friday here at the University of Ottawa, where he was attending a major academic conference on Ukraine.“What I am hearing is, ‘O.K., for the sake of getting some gas into Kiev, we’re prepared to make some temporary arrangements,’ and the key word on both sides appears to be ‘temporary,’ ” Thane Gustafson, a professor of political science at Georgetown, said in an interview on Friday here at the University of Ottawa, where he was attending a major academic conference on Ukraine.
Russia is facing a raft of economic problems, stemming from the dual pinch of lower oil prices and economic sanctions by the West. Ukraine, despite frantic efforts, has failed to pull together enough alternative supplies to meet its gas needs for winter.Russia is facing a raft of economic problems, stemming from the dual pinch of lower oil prices and economic sanctions by the West. Ukraine, despite frantic efforts, has failed to pull together enough alternative supplies to meet its gas needs for winter.
Each side also appeared to have been strong-armed toward a temporary agreement by the European Union, which had taken its own precautionary measures in case the dispute deepened and Russian supplies were cut off. Russia shut the taps during previous disputes in 2006 and 2009, leaving some homes in Europe cold and forcing rationing for businesses.Each side also appeared to have been strong-armed toward a temporary agreement by the European Union, which had taken its own precautionary measures in case the dispute deepened and Russian supplies were cut off. Russia shut the taps during previous disputes in 2006 and 2009, leaving some homes in Europe cold and forcing rationing for businesses.
After Russia cut off gas supplies to Ukraine in June and demanded prepayment for any future deliveries, European leaders built up stores of gas.After Russia cut off gas supplies to Ukraine in June and demanded prepayment for any future deliveries, European leaders built up stores of gas.
Reaction in Kiev and Moscow reinforced the notion that the deal amounts to only a temporary respite in the gas wars, which will not end until the two countries reach a political accommodation over eastern Ukraine.Reaction in Kiev and Moscow reinforced the notion that the deal amounts to only a temporary respite in the gas wars, which will not end until the two countries reach a political accommodation over eastern Ukraine.
In an interview on Sunday, before the deal was reached, Prime Minister Arseniy P. Yatsenyuk of Ukraine, no friend of the Kremlin, said he expected that the Russians would eventually cut off or reduce gas shipments after they got their money.In an interview on Sunday, before the deal was reached, Prime Minister Arseniy P. Yatsenyuk of Ukraine, no friend of the Kremlin, said he expected that the Russians would eventually cut off or reduce gas shipments after they got their money.
“My feeling is that Russia will repeat the narrative they always did, to get some cash from Ukraine and then say, ‘You know, something has changed, and we are not ready to supply the gas,’ ” Mr. Yatsenyuk said.“My feeling is that Russia will repeat the narrative they always did, to get some cash from Ukraine and then say, ‘You know, something has changed, and we are not ready to supply the gas,’ ” Mr. Yatsenyuk said.
In a statement after Thursday’s agreement, he accused Russia of trying to “blackmail” Europe into dropping a plan in which Russian gas could be piped in reverse, from Slovakia to Ukraine, in the event of a cutoff.In a statement after Thursday’s agreement, he accused Russia of trying to “blackmail” Europe into dropping a plan in which Russian gas could be piped in reverse, from Slovakia to Ukraine, in the event of a cutoff.
Underscoring the acrimony of the overall political situation, some Russian officials said that Ukraine not only could not be trusted to pay for its gas without European backing, but, in fact, could be expected to steal from Russian supplies to Europe.Underscoring the acrimony of the overall political situation, some Russian officials said that Ukraine not only could not be trusted to pay for its gas without European backing, but, in fact, could be expected to steal from Russian supplies to Europe.
“It is a huge concession and an intention, first of all, to reach an agreement with the European Union and partly not to let Ukraine freeze completely,” Ivan Grachyov, chairman of the energy committee in the lower house of Russia’s Parliament, told RIA Novosti news agency. “I think that Russia and the E.U. understood that Ukraine would siphon off the gas illegally in any case. Whatever they say, when winter presses them hard, they will start unsanctioned siphoning. This, of course, raises problems between Russia and Europe.”“It is a huge concession and an intention, first of all, to reach an agreement with the European Union and partly not to let Ukraine freeze completely,” Ivan Grachyov, chairman of the energy committee in the lower house of Russia’s Parliament, told RIA Novosti news agency. “I think that Russia and the E.U. understood that Ukraine would siphon off the gas illegally in any case. Whatever they say, when winter presses them hard, they will start unsanctioned siphoning. This, of course, raises problems between Russia and Europe.”
Aleksei Miller, the chief executive of Gazprom, said that the arrival of winter apparently forced the Ukrainian side to make the deal reached on Thursday. In interviews on Russian television, he also noted that Gazprom had not agreed to extend any additional credit or take on new risks related to Ukraine’s deteriorating financial situation.Aleksei Miller, the chief executive of Gazprom, said that the arrival of winter apparently forced the Ukrainian side to make the deal reached on Thursday. In interviews on Russian television, he also noted that Gazprom had not agreed to extend any additional credit or take on new risks related to Ukraine’s deteriorating financial situation.
“The fact that the agreement has been signed now, at the end of October, in the beginning of the fall and winter season, is no coincidence,” Mr. Miller said. “Of course, it has been influenced by the fact that it is cold in Ukraine, heating is needed in houses, the gas consumption is growing.”“The fact that the agreement has been signed now, at the end of October, in the beginning of the fall and winter season, is no coincidence,” Mr. Miller said. “Of course, it has been influenced by the fact that it is cold in Ukraine, heating is needed in houses, the gas consumption is growing.”
The deal calls for Ukraine to make payments amounting to some $3.1 billion for past-due gas supplies before the end of this year, using money it has borrowed through the International Monetary Fund. It will then be able to buy another $1.5 billion at negotiated prices for the remainder of the winter, also largely using credit from the West.The deal calls for Ukraine to make payments amounting to some $3.1 billion for past-due gas supplies before the end of this year, using money it has borrowed through the International Monetary Fund. It will then be able to buy another $1.5 billion at negotiated prices for the remainder of the winter, also largely using credit from the West.
The deal put the European Union in the unusual position of supporting Ukraine’s effort to pay billions in debt to Gazprom, just a matter of weeks after imposing economic sanctions to pressure Russia to alter its policies in Ukraine, including its annexation of Crimea last March.The deal put the European Union in the unusual position of supporting Ukraine’s effort to pay billions in debt to Gazprom, just a matter of weeks after imposing economic sanctions to pressure Russia to alter its policies in Ukraine, including its annexation of Crimea last March.
Energy industry experts said the deal also reflected a desire by Gazprom to demonstrate its reliability as a business partner, and to reassure customers in Europe that it was not being used as a political tool by the Kremlin.Energy industry experts said the deal also reflected a desire by Gazprom to demonstrate its reliability as a business partner, and to reassure customers in Europe that it was not being used as a political tool by the Kremlin.
Trevor Sikorski, an analyst at Energy Aspects, a London market research firm, said he viewed Thursday’s deal as a temporary arrangement, but one that would give time for a longer-term solution to be reached, perhaps next year, and offered assurance for this winter season “The deal doesn’t remove all the risks, but makes them less acute,” he said. Trevor Sikorski, an analyst at Energy Aspects, a London market research firm, said he viewed Thursday’s deal as a temporary arrangement, but one that would give time for a longer-term solution to be reached, perhaps next year, and offered assurance for this winter season. “The deal doesn’t remove all the risks, but makes them less acute,” he said.
“If you are Gazprom, the worst thing for you is not to get gas to your Western European customers,” Mr. Sikorski said. “Most of your revenue is coming from exports, and you have a lot of very expensive spending to pay for. They don’t want to be seen as more of a security of supply risk than they already are seen.”“If you are Gazprom, the worst thing for you is not to get gas to your Western European customers,” Mr. Sikorski said. “Most of your revenue is coming from exports, and you have a lot of very expensive spending to pay for. They don’t want to be seen as more of a security of supply risk than they already are seen.”
Any hint of a supply threat could send Europeans scrambling for alternative sources. Just this week, Lithuania heralded a floating liquefied natural gas terminal that could eventually meet the needs of the Baltic States.Any hint of a supply threat could send Europeans scrambling for alternative sources. Just this week, Lithuania heralded a floating liquefied natural gas terminal that could eventually meet the needs of the Baltic States.
Despite Gazprom’s efforts to show its reliability as a partner, Dr. Gustafson, of Georgetown, said that ultimately there was no escaping the role of politics in the Russian gas business.Despite Gazprom’s efforts to show its reliability as a partner, Dr. Gustafson, of Georgetown, said that ultimately there was no escaping the role of politics in the Russian gas business.
“In the end,” he said, “it all depends on whose hand is on the tap.”“In the end,” he said, “it all depends on whose hand is on the tap.”