Ukraine and Russia reach compromise gas deal

By Aussiegirl

Ukraine and Russia have achieved a face-saving compromise that includes concessions by both sides, a result that could have been quietly achieved without the clumsy gas-shutoff which led to howls of outraged protest by an alarmed Europe.

Ukraine has said all along that it was willing to compromise on a slowly escalating scale of pricing until market rates were achieved. But Putin foolishly thought he would flex his muscles and blackmail Ukraine into submission, destabilizing it economically and politically ahead of crucial upcoming elections. Once again, ham-handed interference in Ukraine's internal political affairs through intimidation and outright threat has backfired. Instead, Putin has given himself an international black eye, and raised serious doubts about Russia's reliability as both a geopolitical and economic partner.

The compromise between the Russian company Gazprom and the Ukrainian company Naftogas essentially allows Russia to sell gas to an intermediate trading company called RusUkrEnergo at a price of $230 per 1000 cubic meters. RusUkrEnergo will then buy cheaper gas from sources like Turmenistan at a price of $65 per cubic meter and resell the gas to Ukraine at the lower price of $95 per cubic meter, less than half of the increase that Russia had been seeking. In addition, the five-year deal provides that Gazprom will no longer pay transit fees to Ukraine in gas, but will instead pay an increased price of $1.60 for 1,000 cubic meters traveling through 100 kilometers pipeline, from the $1.09 rate it had been paying. In the long run, it is in Ukraine's interest to wean itself from dependence on cheap Russian gas, and it has every intention of doing so in an orderly and reasonable fashion.


New Zealand's source for World News on Stuff.co.nz: Russia, Ukraine settle gas dispute