Lessons from the Russian Gas Dispute

The acrimonious three-week natural gas dispute between Russia and Ukraine, which left millions of customers in Central and Eastern Europe freezing without gas for heating, is now finally over. Under a face-saving compromise finally hammered out on Jan. 20, Russia's Gazprom (GAZP.RTS) has achieved its central objective of making Ukraine pay "market prices" for its gas, which will be linked to the European average. But to sweeten the pill, Ukraine has notched a 20% discount during 2009. Other terms of the deal include a one-year freeze on transit fees charged by Ukraine and the elimination of RosUkrEnergo, a controversial trading outfit that has acted as intermediary in the Russia-Ukraine gas trade.

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