Gas shipments to resume as Russia, Ukraine reach deal

Ukrainian Prime Minister Yulia Tymoshenko, left, shakes hands with Russian Prime Minister Vladimir Putin after signing a gas deal in Moscow on Monday.(Alexander Zemlianichenko/Associated Press)

Russia and Ukraine have reached a deal that will restore the flow of natural gas to parts of eastern Europe that were left freezing for nearly two weeks because of the dispute.

The gas shipments could still take up to 36 hours to cross Ukraine and begin to reach the tens of thousands of homes and businesses that have been without heat during freezing winter weather.

The agreement was signed Monday by the heads of the Russian state-run natural gas monopoly Gazprom and its Ukrainian counterpart Naftogaz, the Associated Press reported.

The signing was witnessed by Russian Prime Minister Vladimir Putin and Ukrainian counterpart Yulia Tymoshenko.

Putin said Gazprom had received orders to resume shipments bound for Europe

Russia cut off gas deliveries through Ukraine on Jan. 1 in a dispute over pricing and transit fees.

Siphoning alleged

Moscow alleged that Ukraine illegally siphoned off supplies meant for other European countries between Jan. 1 and Jan. 7 — a charge Kiev denies.

Gazprom supplies one-quarter of all natural gas consumed by EU countries and 80 per cent of that gas is piped through Ukraine.

The hardest hit of the 18 countries affected by the gas cutoff include Bulgaria, Moldova and Bosnia.

Under the new agreement, Ukraine will buy Russia gas with a 20 per cent discount from this year's average European price, which Russia says is the equivalent of $450 US per 1,000 cubic metres. This means Ukraine will have to pay more for its energy supplies than it did before.

But with the fall of oil prices, natural gas prices for Europe are expected to fall sharply later this year.

Ronald Smith, a strategist at Moscow's Alfa Bank, told the Associated Press that Ukraine could be paying as little as $150 for 1,000 cubic metres, Ukrainian parliamentary Speaker Volodymyr Lytvyn said Monday that Ukraine will pay an average price of $240 to $250 this year.

Russia also won't have to pay higher transit prices to Ukraine to use its pipelines.

With files from the Associated Press