Chill in Russia-Ukraine gas talks threatens Europe's winter supplies

Russian natural gas producer Gazprom has demanded $3 billion in unpaid bills from Ukraine's heavily indebted government. European consumers rely on Russian gas, some of which is piped through Ukraine.  

Ukraine and Russia are still deadlocked in a long-running dispute over natural gas supplies, raising concerns across Europe that Russian gas supplies could be insufficient to heat homes this winter. 

Russia said it would only resume gas flows to Ukraine once the government in Kiev settled its debts and agreed to new terms for future deliveries. But Ukraine – with its economy in tatters after a political crisis followed by a separatist uprising by pro-Russian rebels – said it couldn’t afford to pay without assistance from the European Union.

Russian President Vladimir Putin and Ukrainian President Petro Poroshenko met in Brussels on Tuesday to discuss the specifics of a deal after agreeing to a broad outline last week. The Associated Press reports that talks between the two are due to resume Oct. 29.

Russian Energy Minister Alexander Novak said $1.6 billion was still missing from the $3.1 billion Ukraine had agreed to pay toward settling its debt this year, The New York Times reports. He added that Ukraine needed to pay Gazprom, the state-owned energy giant, in advance for November and December gas deliveries.

“This cash gap requires funding,” Mr. Novak said, according to the Times. He suggested that the EU “should examine the situation and share some of that burden.”

With Europe facing growing pressure from Moscow to provide financial support, Ukraine has asked the EU for a $2.5 billion loan to help cover its debt.

The EU agreed on a $14 billion aid package to Ukraine earlier this year. In April, the IMF agreed to lend Kiev up to $17 billion to support economic reform as part of a larger international aid program. To date, the IMF has disbursed $4.6 billion of the pledged amount. 

EU Energy Commissioner Günther Oettinger said the bloc would “do everything to make sure we can assist our Ukrainian partners,” the Wall Street Journal reports. 

European officials worry that a continued freeze on Russian gas deliveries to Ukraine could lead the country to siphon off gas that passes through its territory on the way to Europe. As the AP reports:

Europe is concerned that if Ukraine would do that, Russia could cut off all flows through Ukraine, leaving parts of Europe without supplies in the dead of winter, as has happened in the past.

Sergie Kupriyanov, a spokesman for Gazprom, told Reuters that gas deliveries to Ukraine would resume once Kiev received financial aid. "If Europe gives them the money, then gas will flow," he said.

Gazprom cut off its gas deliveries to Ukraine in June, citing an unpaid bill of $4.5 billion and disagreements over pricing. Ukrainians have accused the Russians of initiating the stoppage as a way to punish Kiev for "tying itself more closely to the West,” The Times reports.

While the debt issue remains unsettled, Ukraine has agreed to pay Gazprom a fixed price of $385 per thousand cubic meters of gas until March – 40 percent higher than what it paid before February.

Ukraine received close to 60 percent of its gas from Russia last year, the Wall Street Journal reports. The EU relies on Russia for more than a third of its gas imports.