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Splitting the Bill
Ukraine Bends a Little in Its Standoff with Gazprom

Last week Ukraine stopped piping natural gas to rebel-controlled areas in the east, blaming the decision on sub-standard infrastructure destroyed by protracted fighting. Moscow promptly stepped in and began supplying these areas directly, but was billing Kiev for its trouble, counting the gas deliveries to the rebels against the amount the Ukrainians prepaid late last year. As a result, Gazprom was threatening to cut off supplies to Ukraine as early as today.

But then, as Reuters reported yesterday, Gazprom appeared to make a concession of sorts, agreeing to table the question of who pays for that gas as it enters negotiations for the next round of Ukrainian prepayment:

[O]n Thursday, Gazprom spokesman Sergei Kupriyanov said: “We are ready at the moment to exclude our gas supplies to Donbass from our discussions (with Ukraine).”

Ukraine then made a concession of its own, sending a small prepayment of $15 million to Russia’s Gazprom—an amount worth two to three days’ worth of natural gas supplies at most. This shifts the day of reckoning into early next week, when energy ministers from both Ukraine and Russia are to meet in Brussels to try to hammer out some kind of compromise.

Make no mistake: the Kremlin is playing hardball here. The ugly thing about Gazprom’s “concession” for Kiev is that it draws the rebel-held areas even further into Russia’s orbit by quasi-formalizing the gas supply arrangement—creating yet another set of facts on the ground that would have to be rolled back should Ukraine regain the nominal control over the rebel territories promised it at Minsk. Kiev’s decision to pay up even a little, on the other hand, is an admission that their backs are up against the wall. It’s not a great backdrop against which to enter high-stakes negotiations.

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