Geoffrey Smith
reports at
Fortune:
Russia, Ukraine and the European Union failed late Tuesday to strike a deal that would guarantee Russian gas supplies through the coming winter, after the E.U. refused a request by the Russian side to guarantee full and proper payment by Ukraine.
The deadlock revives the risk that Russia may cut off gas deliveries to parts of Europe this winter, as part of a wider strategy to assert its influence in Ukraine. That would further aggravate the economic slowdown that has hit both countries since the Ukrainian crisis erupted.
It also exposes the reluctance of Europe to back up its political support for the Kyiv government with hard cash.
Ukraine has a record of siphoning Russian gas destined for Europe, and its own finances are in a disastrous state after years of mismanagement by President Viktor Yankovych and the economic collapse in the turmoil that followed his ouster in February. The economy is projected to shrink by some 7% this year...
Russia supplies over a quarter of the E.U.’s gas, and most of those supplies have traditionally gone through Ukraine. Countries such as Bulgaria and Slovakia are completely dependent on Russian gas shipped through the Ukrainian pipeline system, and would face drastic energy shortages this winter if no agreement is struck.
Russia stopped shipping through Ukraine in May, claiming Ukraine owed it over $5 billion for past supplies. Ukraine’s national gas company Naftogaz says it only owes $3.1 billion. The sides are arguing over the difference in a Stockholm arbitration tribunal.
