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Russia Guarantees Hike In Gas Exports To Europe Via Ukraine

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Russia has agreed to substantially increase gas exports to Europe via Ukraine in the next five years.

Under amendments agreed to in an existing deal this month, Russia's state-owned gas monopoly OAO Gazprom guaranteed its Ukrainian counterpart Naftogaz Ukrainy the transfer of 112 billion cubic meters of gas annually over the next five years through Ukrainian territory.

This is an increase of 16 billion cubic meters of gas that Russia has been pumping through Ukraine last year.

Addressing a Russian-Ukrainian energy conference in Kiev on Tuesday, Ukrainian Minister for Fuel and Energy Yuriy Boyko termed the Russian gesture as "a significant compromise," and thanked Moscow for the guarantees that helps avoid any future gas disputes.

Relations between Moscow and Kiev over gas supply are followed closely by Europe because Ukraine is a key transit point for Russian oil and gas supplies to many European countries.

In January last year, Russia halted all gas shipments to Europe via Ukraine for two weeks amid a dispute over unpaid bills and new prices, resulting in a fuel crisis in European countries in the height of winter.

Russia doubled the gas price it charges Ukraine after the dispute was settled.

In April, Russia agreed to a dramatic cut in the price of natural gas it sells to Ukraine in exchange for an extension of Russia's lease of a Ukrainian port for its Black Sea fleet.

The price paid by Ukraine for importing 1,000 cubic meters of fuel was reduced to $230, making it the single biggest reduction of natural gas pricing by Moscow since the break-up of the Soviet Union.

The overhauling of the two countries' energy relations were the most advantageous outcome of a change of administration in Kiev in February, when Victor Yanukovych was elected Ukraine's President.

Ukraine transits about 80 per cent of Russian gas exported to other European countries, while the rest flows through Belarusian pipelines.

Both the countries were under threat as Russia is looking for alternative transit options for gas supplies to Europe, which might sharply reduce their role in the energy security of Europe and transit revenue of about $1 billion a year.

Russia is partnering with other European countries in the Nord Stream pipeline project being built under the Baltic Sea to transport Russian gas to the European Union

The North Stream pipeline, envisaged to pass through the waters of Russia, Finland, Sweden, Denmark, and Germany, is aimed at enabling Russia to maintain supplies to the European Union and lessen its dependence on Ukraine.

Simultaneously, a Russian-Italian South Stream project proposes to pump 63 billion cubic meters of Central Asian and Russian gas to the Balkans and on to other European countries across the Black Sea.

Gas-supply disputes between Russia, which is maintaining its influence in the European and Central Asian energy sector, and its neighbors, cause worry for Europe.

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