Russia, Ukraine reach gas deal; Europe still waits

Russia cut off gas shipments to Europe via Ukraine on Jan. 7 as a price dispute and a political tussle between Kiev and Moscow escalated. The confrontation deeply shook Europeans' trust in both Russia and Ukraine as reliable energy suppliers and forced over 15 nations to scramble to find alternative sources of energy,

Amid growing concern about the damage to their countries' reputations, Russian Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko negotiated for 10 hours and announced the framework of an agreement before dawn Sunday.

Officials of Russia's state-run gas monopoly Gazprom and its Ukrainian counterpart Naftogaz labored Sunday to lay out the precise terms so a deal can be signed Monday when Tymoshenko returns to Moscow.

But even if Russia turns on the taps immediately after the signing, it could take at least another day for the gas to travel hundreds of miles through Ukrainian pipelines to Europe.

"Over the past few days, we have seen several similarly hopeful moments. The only thing that counts for the EU is the resumption of gas supplies," said Trade Minister Martin Riman of the Czech Republic, which holds the EU presidency.

Russia had alleged that Ukraine was siphoning off Europe-bound gas. Ukraine disputed this, claiming that Russia was not sending enough "technical gas" to push the rest further west.

Europe gets 20 percent of its gas from Russia via Ukraine, but some countries, including Bulgaria and Slovakia, are totally or largely dependent on Russian gas. The Czech gas company RWE began sending emergency gas shipments Sunday to Slovakia, where over 1,000 businesses have been crippled by gas rationing.

Putin announced that Ukraine will pay 20 percent less than the European "market price" price for gas this year, which Russia says is $450 per 1,000 cubic meters. That's more than twice as much as the $179.50 Ukraine paid in 2008.

However, natural gas prices for Europe are expected to fall sharply later this year, due to the fall in oil prices. By midsummer, Ukraine could be paying as little as $150 for 1,000 cubic meters, said Ronald Smith, a strategist at Moscow's Alfa Bank.

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