Russia, Ukraine locked in EU-brokered gas talks

BRUSSELS - Russia and Ukraine were locked in EU-brokered talks Wednesday as Moscow extended a gas cut-off deadline in the latest sign the worst East-West crisis in years may be easing.

The negotiations are being closely watched to see if both sides really want to bring some sort of closure to a stand-off that began with pro-EU protests in Kiev six months ago.

If successful, they would build on a peace push by Kiev's new president who on Tuesday ordered the creation of humanitarian corridors in the country's war-torn east, meeting a key Russian demand.

Stressing the positive, Russian giant Gazprom said it would now give Kiev another five days, until June 16, to reach a deal before it would demand up-front payment for gas deliveries.

"The Russian side has taken a step in favour of pursuing negotiations which have been going on quite intensely," Gazprom head Alexei Miller said after meeting EU Energy Commissioner Guenther Oettinger.

President Vladimir Putin took a similar line, telling German Chancellor Angela Merkel he had ordered the Russian delegation to take a "constructive position" so as to reach "a mutually acceptable agreement." "These negotiations have a good chance of success," Russia's permanent EU representative Vladimir Chizhov said before the talks, adding, jokingly: "But a threesome is needed for this tango." Ukraine Prime Minister Arseniy Yatsenyuk was in a less forgiving mood, however, attacking Russia for playing "games" after Moscow offered a US$100 (S$125.09) discount on the gas price.

"We know these Russian games: a discount is set by a Russian government decision and rescinded by a Russian government decision. Our position remains the same - we want a change to the contract," Yatsenyuk said.

"All the traps and hooks that Russia is once again laying out for us are unacceptable," he said.

Talks to take 'days'

Oettinger chaired a marathon round of talks on Monday with Russian Energy Minister Aleksandr Novak and his Ukraine counterpart Yuriy Prodan but they broke up early Tuesday without an accord as the Gazprom cut-off deadline loomed.

With all sides agreeing that as long as the talks continued, supplies would not be interrupted, Oettinger announced another round of talks for Wednesday.

There would be no early breakthrough, he cautioned, with a deal likely to take days to reach.

Moscow says Kiev owes it US$4.5 billion (3.3 billion euros) in outstanding bills but Ukraine has refused to pay in protest at Russia's decision to nearly double the price in the wake of the February ouster of Kremlin-friendly president Viktor Yanukovych after months of protests.

Analysts expect the two sides to agree a price of around US$350 (260 euros) per thousand cubic metres of gas, about halfway between the old rate of US$268.50 and the US$485 Russia set after Yanukovych's replacement by a pro-Western government in Kiev.

About 15 per cent of the natural gas that Europe consumes is Russian gas that transits through Ukraine, leaving it uncomfortably reliant on a Russia which turned off the taps in similar disputes with Kiev in 2006 and 2009.

Signs of easing crisis

Newly-elected pro-Western President Petro Poroshenko on Tuesday ordered the creation of humanitarian corridors in eastern Ukraine to allow civilians to escape after two months of fighting against pro-Russian separatists.

Putin has pushed the idea of such corridors but Poroshenko stopped short of accepting a request to allow Russian aid into the eastern rustbelt, fearing this would only support the rebels.

Russia said the corridor decision was "welcome" but Foreign Minister Sergei Lavrov warned at the same time that Kiev was continuing "and even intensifying" military operations in some areas.

German Foreign Minister Frank-Walter Steinmeier, after meeting Lavrov, said he saw "light at the end of the tunnel (and a)... readiness from all sides to act to de-escalate the crisis." On the ground, Poroshenko's offers have met only with suspicion from pro-Russia rebels.

"We heard about this initiative but doubt it will come into force," a top leader in the self-proclaimed "Donetsk People's Republic" told Russia's Interfax news agency.

The fighting has engulfed two economically vital regions that are home to seven million people and have extensive trade and cultural ties to Russia.