Novak announced that Ukraine had agreed to pay $385 per 1,000 cubic meters for Russian natural gas, a sum that Gazprom had advocated throughout the negotiations. Moreover, Novak said that Ukraine had agreed to prepay for natural gas supplies and that the two sides had formulated a debt payment schedule.
Some of the terms of a temporary natural gas deal that Novak outlined closely resemble the so-called winter package that EU Energy Commissioner Gunther Oettinger presented on Sept. 26. Oettinger advocated an interim price of $385 per 1,000 cubic meters and prepayment from Ukraine for winter supplies. Similar to Oettinger's proposal, Novak's announcement appears to pertain only to a short-term deal covering the winter months.
While the Milan negotiations signal progress toward an interim natural gas deal to help Ukraine receive natural gas supplies throughout the winter months, some key issues remain unresolved. Oettinger had proposed in September that Ukraine's Naftogaz pay off $3.3 billion in debts by the end of 2014. He indicated that the International Monetary Fund could help Ukraine meet debt obligations to Russia's Gazprom by providing guarantees, though a concrete commitment of international financial assistance for Ukraine to pay its energy bills has yet to materialize.
While in Milan on Oct. 17, Russian President Vladimir Putin said Europe should help the government in Kiev pay for its natural gas deliveries. Meanwhile, Gazprom's chief said Ukraine is expected to secure finances for the interim deal before the Oct. 21 trilateral meeting between Ukraine, Russia and the European Union. The Oct. 21 talks thus will probably focus on the European Union and international community's role in helping to finance Ukraine's natural gas purchases throughout the winter. While the Europeans likely will support Ukraine financially in an interim energy deal in an effort to ameliorate the crisis, in the long run Ukraine will struggle to reach an energy arrangement that it finds financially sustainable.
