The Russian-Ukrainian Gas Deal: Taking the Bite out of Winter?

11-11-2014

A recent agreement between Moscow and Kyiv, triumphantly heralded by the European Commission, is unlikely to prove everything promised by an outgoing Commission President José Manuel Barroso. Brokered by the EU, the deal should preclude a repeat of the winter gas crisis that hit Ukraine and the EU in 2006 and 2009. Already, Russia – which cut supplies to Ukraine in June 2014, when pro-Russian separatists were waging war in eastern Ukraine – has agreed to restore the supply in the cold months ahead. Prices and conditions have also been settled. But the plan’s short-term solutions leave a number of problems unresolved. Ukraine’s national reserves and the IMF will pay for some of Ukraine’s gas, although a contribution from EU taxpayers cannot be ruled out. Not all of the agreement has been made public, and its sustainability is questionable: even if the deal has taken the bite out of winter, the ramifications for the following seasons are uncertain. The EU’s energy security is likely to remain hostage to tensions between Kyiv and Moscow until Ukraine’s structural weaknesses are repaired and the country’s role as guardian of the pipelines reduced.

A recent agreement between Moscow and Kyiv, triumphantly heralded by the European Commission, is unlikely to prove everything promised by an outgoing Commission President José Manuel Barroso. Brokered by the EU, the deal should preclude a repeat of the winter gas crisis that hit Ukraine and the EU in 2006 and 2009. Already, Russia – which cut supplies to Ukraine in June 2014, when pro-Russian separatists were waging war in eastern Ukraine – has agreed to restore the supply in the cold months ahead. Prices and conditions have also been settled. But the plan’s short-term solutions leave a number of problems unresolved. Ukraine’s national reserves and the IMF will pay for some of Ukraine’s gas, although a contribution from EU taxpayers cannot be ruled out. Not all of the agreement has been made public, and its sustainability is questionable: even if the deal has taken the bite out of winter, the ramifications for the following seasons are uncertain. The EU’s energy security is likely to remain hostage to tensions between Kyiv and Moscow until Ukraine’s structural weaknesses are repaired and the country’s role as guardian of the pipelines reduced.