Ukraine and Russia Move Closer to an Interim Natural Gas Deal

On Oct. 17, following a meeting in Milan with Gazprom head Alexei Miller and Ukrainian Energy Minister Yuri Prodan, Russian Energy Minister Alexander Novak announced that Russia and Ukraine had resolved all major issues in their negotiations over an interim deal for natural gas supplies for the winter months. However, Ukrainian President Petro Poroshenko, while refraining from discussing Ukraine's position, said that the main parameters of a new natural gas contract had been agreed upon but that negotiations would continue.

Without a deal for at least 5 billion cubic meters of Russian natural gas imports during winter, Ukraine could run out of natural gas by early January. Moreover, European leaders — fearing potential disruptions to their natural gas supplies should Ukraine siphon off natural gas flowing to European markets — are also pushing Ukraine to reach an agreement with Russia. With Ukraine's parliamentary elections scheduled for Oct. 26, Kiev does not want to sign a deal that makes it appear weak or conciliatory. Nevertheless, the Ukrainian government will encounter a growing number of limitations as winter nears that will motivate it to provide concessions on terms and ultimately sign a temporary natural gas deal with Russia.