No progress in talks over Russian gas supplies to Ukraine

As temperatures have dropped below freezing in Ukraine and relations with Russia have come under new strains, energy officials from the two former Soviet republics met late into the night Wednesday in a last-ditch attempt to negotiate a resumption of Russian natural gas deliveries for the winter.

Ukrainian Energy Minister Yuri Prodan and his Russian counterpart, Alexander Novak, met in Brussels amid low expectations that the talks brokered by European Union Energy Commissioner Gunther Oettinger would move the adversaries from their standoff over Ukraine’s debts for previous gas supplies and Russia’s threat to cut deliveries to Europe as well.

No serious progress was reported, and European Union officials canceled a news conference at which they had hoped to announce a deal to keep Ukrainians supplied with heating fuel this winter and enough gas flowing through Ukrainian pipelines to meet European countries’ needs.

The EU officials said the negotiators would reschedule their news conference for Thursday if there was anything positive to announce.

Ukraine owes Gazprom $5.3 billion for supplies that were cut off in April after months of nonpayment, according to the Russian energy behemoth.

The calculation of Ukraine’s debt is one of the issues frustrating an agreement. Moscow offered Kiev a 30% discount on gas imports late last year as an inducement to then-Ukrainian President Viktor Yanukovich to keep the country’s economy closely tethered to Russia’s instead of signing an association agreement with the European Union.

That deal was scuttled after a pro-Europe rebellion ousted Yanukovich in February. An angry Kremlin then seized Ukraine’s Crimean peninsula, home to Russia’s Black Sea fleet and other defense installations, and canceled another gas rate cut for Kiev that had been part of the leasing agreement for the Kremlin’s Crimean bases.

European Union-mediated talks have secured agreement from Moscow to sell gas to Ukraine at $385 per 1,000 cubic meters. That is a compromise between the heavily discounted rate in place when Yanukovich was in power and the price demanded after relations between the countries soured this year with the Crimean annexation and Moscow support for separatist militants in eastern Ukraine.

The negotiators entered Wednesday’s talks in Brussels under new clouds of contention as fighting resumed between Ukrainian government forces and the Russian-backed militants occupying major industrial sites in eastern Ukraine. More than 3,700 people have been killed in the conflict that has cleaved the Donetsk and Luhansk regions from the Kiev government’s control.

Russian Foreign Minister Sergei Lavrov on Tuesday angered Ukrainian leaders and their Western allies by saying that Moscow would recognize separatist elections planned for Sunday in areas of eastern Ukraine controlled by the militants.

The leaders of the self-proclaimed independent republics of Donetsk and Luhansk blocked voters from taking part in Ukrainian parliamentary elections this past Sunday, contending the territory they hold is no longer part of Ukraine.

In an interview with Germany’s ZDF television, EU mediator Oettinger gave the gas talks a 50-50 chance of success in producing an agreement. The New York-based Eurasia Group consulting firm put the likelihood of failure at 60%.

Ukrainian Finance Minister Oleksandr Shlapak told journalists in Kiev that he doubted there was sufficient goodwill to resolve the standoff.

“I have the impression that no one wants an agreement. I mean, first and foremost, the Russian side,” Shlapak told reporters on the eve of the negotiations that followed by a week an effort that failed for lack of European guarantees that Kiev would pay its arrears.

Western European states import about one third of their natural gas needs from Russia, and half of that travels through pipelines across Ukraine. Russia has warned that any attempt by the Ukrainians to siphon from the European deliveries for their own needs would result in commensurate cutbacks in the gas volume delivered through Ukraine, meaning that any stolen flow would come at the expense of Ukraine’s European allies.

Disputes between Ukraine and Russia over natural gas prices led to disruptions throughout the European supply network in 2006 and again in 2009.

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