Russia and Ukraine have renewed the gas agreement that expired in March 2015 for another three months until the end of June. The $100 gas discount for 1,000 cm was confirmed, and the “take-or-pay” principle will not be applied. According to Aleksej Miller, president of Gazprom, last year Ukraine withdrew just 14 Bcm of gas out of the 42 envisaged in the contract.
This agreement was presented as an act of good will form the Russian side, as president Putin put it: “I agree, taking into consideration the difficult state of the Ukrainian economy, we need to help our partners out”. At the same time, he assured that Russia has no intentions to use gas as an instrument of political pressure on Ukraine.
In the Ukrainian energy system, natural gas is mostly used for central heating, while nuclear and coal-fired plants accounts for the overwhelming majority of power generation. Since the majority of coal mines is located in regions controlled by the separatists in the Eastern part of the country, Ukraine is forced either to import coal from abroad (including from Russia) or to try and come to a difficult agreement with the rebel regions’ leaders. Last Autumn, the separatist republics declared not to be willing to “trade with those who fire at them”, and later publicly asked Russian government not to sell coal to the Ukrainian government. In mid-March, however, Ukrainian officials officially announced the restoration of coal deliveries from the East of Ukraine.
Meanwhile, as a result of the energy crisis, Ukraine had to agree to import electricity directly from Russia. The agreement to provide 1.5 GW of available electricity capacity from Russia to Ukraine was reached extremely fast since, facing a supply crisis, the Ukrainian government decided to first cut electricity supplies to the Crimean peninsula (which Russia annexed in March 2014). Under the agreement, Kiev will be obliged to sell electricity to Crimean customers.
Thus, the Russian and Ukrainian energy systems are interdependent not just because of natural gas. As the Ukrainian energy system is still battered by the war and by the divisions within the country, the energy issue will certainly remain high in the agenda.