Gazprom and Ukraine Settle Gas Dispute

The agreement finds a way for Kiev to pay off its billion-euro debt without the gas giant cutting off its supply

After a week of negotiations, Russian state-controlled gas monopoly Gazprom and Ukraine have come to an agreement that settles their latest energy dispute.

On Tuesday (9 October), Ukrainian prime minister Viktor Yanukovich and his Russian counterpart Viktor Zubkov said during a televised meeting that they avoided a prolongation of their latest quarrel by reaching a deal on repayment terms for Kiev's €1.4 billion debt.

"We created a mechanism allowing us to regulate this issue," the outgoing Ukrainian prime minister said, according to the Financial Times.

Under the deal, Kiev will pay off its debt by 1 November. Some €850 million will be paid by transferring gas from storage facilities in Ukraine to Gazprom for further export and the rest by the gas distributors on the Ukrainian market.

Gazprom threatened to cut gas supplies to Ukraine at the end of this month if the country failed to resolve the €900 million debt the company says Kiev owed.

Mr Zubkov later stated that Ukraine's debt had risen by early October to €1.4 billion, but Gazprom refused to comment on why, or how the debt had increased, the Financial Times reports.

According to the gas giant, the agreement to settle the debt was signed on Monday (8 October) between Gazprom's chief executive Alexei Miller and Ukraine's energy minister Yuri Boiko.

Brussels to watch deal closely

The settlement will come as a relief to the EU, which feared the dispute could escalate and affect energy supplies to Europe -- something that happened during a similar dispute in early 2006.

But EU energy commissioner Andris Piebalgs said Brussels will continue to keep a close eye on the situation.

"This issue is definitely settled, [but] now we still have difficult times ahead, and also the price negotiations for next year," he said, according to Reuters.

"We should be watching very carefully how developments are in December, January," he added.

Russia accounts for one quarter of the EU's gas consumption, and eighty percent of this gas is transported through Ukraine.

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