Talks to Resume on Winter Gas for Ukraine

by Al Pessin

October 25, 2014

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Ukrainian and Russian officials will meet again next week in an effort to settle their dispute over natural gas supplies that threatens to leave Ukraine short of heating fuel for the coming winter.

The dispute is complex, with economic and geopolitical dimensions, and it will unfold shortly after voters go to the polls on Sunday in the first parliamentary election since the overthrow of the Moscow-backed leader Viktor Yanukovich.

It seemed there was a breakthrough at a rare meeting October 17 between the Russian and Ukrainian presidents.

"We agreed with Ukrainian partners on the conditions of the resumption of the gas supplies to Ukraine, at least for the winter period," Russian President Vladimir Putin said that day.

We have agreed on the main parameters of the contract and we are now continuing talks on the resources to cover the shortage of funds," Ukrainian President Petro Poroshenko said.

But follow-up talks failed to deliver an agreement on the details. And that same day, during a visit to a military base in the midst of the parliamentary election campaign, Ukrainian Prime Minister Arseny Yatsenyuk was in a combative mood.

"I will tell you frankly, I think Putin doesn't want to sign any agreement, and his goal is to freeze Ukraine," he said. "We must be ready for the worst-case scenario."

Impact on industry

Ukraine depends on Russian gas not only for cooking and heating, but also for its energy-inefficient factories, mainly the eastern part of the country, including in areas controlled by Russian-backed rebels.

That's a big part of the problem, said Pierre Noel, who specializes in economics and energy at the International Institute for Strategic Studies, a global security organization.

"In the long term, nothing has been solved," Noel said, speaking via Skype. "Ukraine is in a very difficult economic situation. It was before the conflict. The conflict sharply aggravated that."

After Ukraines pro-Russian president was ousted in February, Russia cancelled three discounts it had given Ukraine on a gas price set five years ago. Ukraine cant afford that price now.

Its not a popular view in Kyiv, but some experts see the possibility of trading recognition of a Russian role in eastern Ukraine for a new discount.

"This is the logic behind the talk of federalization of Ukraine," Noel said. "Without breaking up the country politically, you would allow those eastern industrial provinces to keep their sort of special relationship with Russia."

Russian natural gas facilities provide crucial supplies for much of Europe, including Ukraine. At the same time, Russia is under heavy Western sanctions for annexing Crimea and meddling in eastern Ukraine.

All that complicates the effort to reach agreement on Ukraines natural gas supply, as winter approaches and talks resume next week.

Sunday polls

President Poroshenko called on Ukrainians on Saturday to elect a majority on Sunday that would see through a pro-Europe, reform agenda and break with the Soviet past.

Expecting a big win for his political bloc in the first parliamentary contest since the ouster of Yanukovich, Poroshenko said he saw a radically new assembly emerging on Sunday.

But to push through his reform strategy, he needed a majority in the Verkhovna Rada [parliament], one that is for reform and not corrupt, one that is pro-Ukrainian and pro-European and not pro-Soviet, he said in a televised address to the people.

Without such a majority in parliament, the president's program which millions of Ukrainians believed in in June will simply remain on paper, he said.

Poroshenko, who was elected president in May by a landslide after Euromaidan street protests ousted Yanukovich, called Sunday's snap vote to clear out Yanukovich loyalists from parliament and secure increased legitimacy for Kyiv's pro-Western leadership in the face of pressure from Russia.

He also pledged to stick to his peace plan to find a negotiated end to the conflict in the east and ruled out ordering any military storm of separatist strongholds such as the city of Donetsk.

We can only get those territories back by a political settlement and not by military means," he said. "Nobody will stop me from seeking a peaceful way out of the situation.

Portions of this article are from Reuters.