Russia, Ukraine locked in marathon gas crisis talks

Officials from Ukraine and Russia were locked in a marathon session of EU-mediated talks early Tuesday in an eleventh-hour effort to avert a cutoff of gas supplies from Moscow to Kiev.

The third gas war in less than a decade began after the ouster of Russia-backed president Viktor Yanukovych in February and Ukraine’s decision to seek closer economic ties with the EU.

Russia hiked Ukraine’s gas price by 81 percent to $485.50 per 1,000 cubic metres — the highest in Europe, and demanded a payment of $5.17 billion (3.79 million euros) for debts and deliveries through June.

Ukraine branded the demands a form of “economic aggression” and threatened to take Russia to international arbitration if the gas were cut off.

The dispute is worrying to Europe, which depends on Russia for about a third of the natural gas it consumes, and roughly half of Russian imports flow through Ukraine.

The talks are under the auspices of EU Energy Commissioner Guenther Oettinger and include the energy ministers from Russia and Ukraine as well as the CEOs of the Russia’s Gazprom and Ukraine counterpart Naftogaz.

Last week Gazprom pushed the deadline back a week to June 9.

Before the start of the fifth round of negotiations Monday, analysts widely expected a deal, as pressure for a compromise was great on all sides.

The price for future deliveries was predicted to be agreed at around $360 per thousand cubic metres of gas — a sum about halfway between Russia’s old price and the one set after the conflict erupted.

An unnamed Ukrainian official said he expected Kiev’s Naftogaz to make an immediate payment of $1.0 billion (730 million euros) for gas it received in the last two months of last year.

“Another $451 million may be paid in the near future,” the Ukrainian source said.

“And for April and May, we expect an initial payment of $500 million.”

But as officials negotiated gas prices, a separate energy dispute flared up between the EU and Russia over the Kremlin-backed South Stream pipeline project.

Moscow on Monday accused the European Union of putting pressure on Bulgaria to suspend work on the key gas pipeline.

The South Stream project is one of Russia’s most valued projects, intended to allow gas deliveries to bypass Ukraine as a transit country to Europe.

“Sometimes Brussels is guided by a desire to punish, a desire to take revenge,” Foreign Minister Sergei Lavrov said, though the EU says the suspension is purely for procedural concerns.