17th Oct 2019

Russia and Ukraine reach gas deal but EU headache remains

Russia and Ukraine reached agreement on gas prices on Wednesday morning (4 January) according to news wires, but the supply crunch has left the EU looking vulnerable on energy.

Under the complicated deal, Russia will sell gas at $230 per 1,000 cubic metres to Gazprom-owned firm Roskurenergo, which will mix Russian gas with cheaper gas from Turkmenistan, Uzbekistan and Kazakhstan and then sell it to Ukraine at $95 per 1,000 cubic metres.

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The news comes after some EU countries, such as Poland and Hungary, saw their gas supplies drop by 40 percent on Monday after Russia turned off the tap to transit state Ukraine on Sunday.

The bitter row saw Moscow accusing Kiev of "stealing" EU gas, while Ukraine said Russia had violated a contract guaranteeing prices until 2009 in punishment for the Orange Revolution.

Both sides wrote letters to the European Commission asking for help in resolving the dispute, while Ukrainian leader Viktor Yushchenko spoke three times with Polish head Lech Kaczynski to try and organise an EU coalition.

But the European Commission and the Austrian presidency stayed out of the talks.

Austrian foreign minister Ursula Plassnik expressed hope on Tuesday for a "a consensual, lasting solution" and energy commissioner Andris Piebalgs said the EU should not be held "hostage."

Not over yet

The crisis has forced the EU to re-examine its energy policy and its strong dependency on Russian gas, with Mr Piebalgs set to meet experts from the 25 member states in Brussels on Wednesday to see just how badly they were hit by this week's events.

Energy supply diversification is also set to dominate the Austrian presidency's first summit in March.

Europe imports about 40 percent of its gas, according to UK government figures published by the BBC.

About 70 percent of the imports come from Russia, with 90 percent of this volume transited through Ukraine.

Germany, France and Italy are the biggest buyers of Russian gas in terms of sheer volume, with Russian imports accounting for between 25 and 40 percent of their consumption.

But eastern and central European countries get almost all their gas from Russia, with Austria on 74 percent, Poland on 62 percent and Slovakia and Finland on 100 percent.

"The [price row] situation has shown how vulnerable the union is to shortages of gas supply", Mr Piebalgs indicated according to the Telegraph.

New group of five

Meanwhile, some member states have taken matters into their own hands, with Poland, Hungary, the Czech republic, Slovakia and Austria striking a deal on Tuesday to work together on energy in international fora.

Hungarian leader Ferenc Gyurcsany took the opportunity to appeal for a common EU energy policy.

"We must understand that energy is not simply an economic question but a comprehensive security question", the prime minister said.

But Hungarian economics minister Janos Koka indicated that the group could not reach agreement on sharing gas reserves in the event of an emergency, PAP reports.

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