Russia, Ukraine agree on gas prices

MOSCOW – Russia settled its standoff with Ukraine over natural-gas prices Wednesday and planned to resume gas shipments to its western neighbor, ending a crisis that raised strong doubts in the West about Russia’s reliability as an energy partner.

The breakthrough, reached during overnight talks between each country’s state-run gas companies, came three days after Russia shut down natural-gas delivery to Ukraine. The move brought sharp reductions in Russian gas sent to Europe via Ukrainian pipelines.

The decision to shut down gas to Ukraine in the middle of winter created strong concerns in Europe and Washington about Russia’s use of its energy resources as a political cudgel against other governments. Analysts believe Russia’s move was driven by the Kremlin’s disapproval of Ukrainian President Viktor Yushchenko’s efforts to draw his country closer to the EU and NATO, and away from Moscow’s influence.

Criticism of Russia’s handling of the gas crisis comes at a particularly sensitive time for the Kremlin, with Russian President Vladimir Putin assuming chairmanship of the Group of Eight leading industrialized nations this year. The G8 will have energy security at the core of its agenda this year.

“Russia wants to be regarded as a pillar of the G8, a major player in the world economy because of its energy resources,” said Viktor Kremenyuk, an analyst with Moscow’s Institute of USA Canada Studies.

“But as a result of using gas supplies as leverage against Ukraine, they’ve created much doubt about this potential role.”

In the past two years, the Kremlin has methodically regained control over Russia’s oil and natural-gas resources, which collectively make the country the world’s largest energy producer.