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Oil Report

INSTANT VIEW - Russia, Ukraine sign deal on gas flows

MOSCOW/KIEV, Jan 12 (Reuters) - Russia and Ukraine signed a deal on Monday for a second time to help secure the resumption of Russian gas supplies to Europe, cut off for nearly a week in freezing temperatures.

Russia has accused Ukraine of siphoning off gas to make up for losses it has suffered since Moscow turned off the tap on Jan. 1 in a dispute over gas prices. Ukraine denies the charge.

COMMENTARY:

NEIL SHEARING, EMERGING MARKETS ECONOMIST, CAPITAL ECONOMICS LTD, LONDON:

“In the near term, Russia didn’t stand to lose much. The concerns from the Russian perspective are more about the medium term and how it is perceived as a secure and stable supplier of energy to the West.”

“Ukraine was going to have a painful recession no matter what happened ... The only lasting solution is that Ukraine essentially has to pay a market price.”

“If this is just an agreement to send Russian gas to Europe via Ukraine, it makes little difference to Ukraine. The big thing is what price is it going to have to pay for its imports?”

BULGARIAN PRIME MINISTER SERGEI STANISHEV IN PARLIAMENT:

“It must be clear that after the transit is restarted ... the crisis cannot be considered solved because the bilateral relations between Ukraine and Russia are not sorted out and the difference remains extremely deep.”

“That is why we insist on the urgent implementation of alternative projects (to deliver gas to Europe).”

RONALD SMITH, CHIEF STRATEGIST AT ALFA BANK:

“This is almost a complete climb down by Ukraine. Russia gets what it wants -- highly lucrative gas exports to Europe start again at 8 a.m. (Central European time) tomorrow, the European monitors are in place and Ukraine gets no gas.”

“Ukraine has given up its only bargaining chip, the ability to shut off the gas ... They (the Russians) have handled the PR job very well.”

“Ukraine will have to pay market prices for their gas. The only bargaining chip they have is that of somebody who can’t pay.”

VALERY NESTEROV, ANALYST AT TROIKA DIALOG BROKERAGE

“It (the deal) means that the most acute phase of the crisis will be over in the coming days ... But the question remains whether they (Ukraine) will be able to ensure that monitors can work without obstacles and (Ukraine) does not resume siphoning off the gas.”

“Ukraine has large gas stockpiles and it gives them a certain freedom of manoeuvre at talks with Russia (over gas prices for 2009). But at the end they will sign it.”

“You need to understand that supply resumption is not an easy process from the technological point of view because there has been even talk about wells stoppages. It will take several days.”

VYACHESLAV BUNKOV, ANALYST AT ATON BROKERAGE

“The signing of the deal does not remove all the problems surrounding the price of gas for Ukraine and transit fees. I think the conflict will be a protracted one, but Europe is relatively safe now.”

JAMES FENKNER, MANAGING DIRECTOR RED STAR ASSET MANAGEMENT

“Gazprom is spending $30 billion in 2009, the last time a barrel of oil was at this price it was spending $4 billion.

“It won’t affect the Gazprom share price. The news flow may be driven by this dispute but the share price is driven by Gazprom in effect being a government ministry.”

IGOR KURINNYY, LONDON-BASED ANALYST WITH ING

“This is a positive development, this agreement is good for all sides -- for Gazprom as well as Ukraine and the EU. Now it will become clear who turns off the gas or who steals it, it was very hard to understand as Gazprom and Ukraine provided contradictory information.

The fact that independent observers will appear will confirm whether it’s Gazprom turning off the taps or Ukraine stealing it. This will lower the risk that the problem will occur in future.”

OLEKSANDER DERGACHEV, INDEPENDENT ANALYST IN KIEV

“It is still unclear how far Kiev and Moscow are willing to go in talks. However, the conflict has deepened to the political sphere to such an extent that it would be very difficult for both sides to move away from their previous statement.” (Reporting by James Kilner, Tanya Mosolova, Vladimir Soldatkin and Katya Golubkova in Moscow, Pavel Polityuk in Kiev and Sofia bureau; editing by Elizabeth Piper)

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