Gazprom, Ukraine in a gas dispute as winter approaches

KIEV, Ukraine - The frigid water that comes out of the hot faucet of Alexander Korniienko's shower in Kiev is a warning for his nation: After months without natural gas shipments from Russia, Ukraine may be facing a chilly winter.

Ukrainian citizens are layering their sweaters in preparation for yet another tough confrontation with the Kremlin, this time over energy. It is a replay of previous wintertime gas cut-offs from Russia that led to accusations that the Kremlin was using its bountiful energy supplies as a political weapon. This year, any wintertime shortfall could be far more serious for Ukrainians already contending with the dire effects of war.

Korniienko has been on the vanguard of those facing the latest gas cut-off, since Kiev eliminated city-provided hot water in July as a conservation measure. Now he bathes by heating water in pots on his stove and sloshing them over his head.

"We have the ice-bucket challenge every morning," said Korniienko, 23, a computer programmer. "You take one shower and you go out and you get sick," he said, fending off a sneeze.

After months of grinding negotiations, officials from Russia, Ukraine and the E.U. on Friday announced a last-ditch proposal to help Ukraine get through the winter, but the sides still appeared to be squabbling over the price Russia will charge Ukraine. Analysts said that the plans may still be derailed.

The European Union is eager to foster a deal, because continued disruptions in Russian gas shipments could expand the frostbite zone to eastern European nations that are largely dependent on Russia for their natural gas supplies. Most of Europe is as far north as Canada -- Minneapolis is at roughly the same longitude as southern France, and Kiev is level with Calgary -- so winters can be bitter. Natural gas is the most important fuel for their heat and hot water.

Experts and diplomats warn that Ukraine has not done enough to prepare for a season with severely limited gas supplies even as other European nations have been trying to stockpile the resource as a safety measure.

"It is not going to be easy," Ukrainian Prime Minister Arseny Yatsenyuk told a Ukrainian television station this month. "Freeze? No, we will not freeze. But it is not going to be warm, I warn you."

Russia seized Ukraine's Crimean Peninsula in March and then backed a separatist insurgency in Ukraine's east that has cost at least 3,500 lives, according to U.N. estimates. The conflict has severely damaged infrastructure there.

As the ground fighting worsened over the summer, so too did the confrontation over energy.

"People understand what the situation is. They know that Russia switched off gas, they know that Russia is leading a war against us, not just war but also an economic war. And naturally they expect a complicated fall and winter period," said Ukrainian Energy and Coal Industry Minister Yuriy Prodan.

Under the E.U. plan proposed Friday, Ukraine would repay $2 billion in debt to Russian state-backed gas company Gazprom by the end of October and an additional $1.1 billion by the end of the year. In return, the company would supply at least 5 billion cubic meters of gas to Ukraine over the next six months at the price of $385 per thousand cubic meters, roughly on par with average European prices and the price it was paying until December 2013. Ukraine needs 5 billion to 12 billion cubic meters of gas beyond what it has already stored to make it through the winter, officials have said.

The E.U. price proposal falls in line with what Russia has been pushing for months, reflecting a mounting European effort to encourage Ukraine to settle the dispute and avoid a broader disruption to gas supplies. About 15 percent of Europe's gas consumption flows through Ukrainian pipelines. Ukraine depends on Russia for 60 percent of its gas.

Prodan told journalists on Friday after the negotiations that Ukraine still had not consented to the price -- the key sticking point in the negotiations -- nor had it settled on the amount to be paid to Gazprom. The negotiators plan to keep talking in coming days. Gazprom says that Ukraine owes it $5.3 billion for gas purchased last year and in the first months of 2014, a figure Ukraine disputes.

Even if the sides do finalize a deal next week, it doesn't eliminate the risk of a cut-off later in the winter, said Edward Chow, an energy expert at the Center for Strategic and International Studies. Russia stopped supplying gas to Ukraine in the winters of 2006 and 2009, also during times of political confrontation.

"There's still a lot of short-term brinksmanship that people can play depending on what else is going on in the political sphere," Chow said.

He said that the government that took over when President Viktor Yanukovych was ousted in February had done little to push reforms to the energy sector that would reduce opportunities for corruption, a major problem that analysts say has contributed to Ukraine's long-term dependence on Russian energy. Ukraine also heavily subsidizes household gas consumption, a politically popular move but one that has created little incentive to increase energy efficiency, which is stuck in the Soviet era.

This year's gas cut-off didn't have a major effect on ordinary Ukrainians' lives during warm months. But as chillier temperatures have settled over the country in recent weeks, the problems are becoming more acute. In Kiev, as in many cities across the former Soviet bloc, hot water and heat are generated at massive central stations and then piped to apartment buildings.

The uncertainty about gas supplies "means we'll need more clothes" this winter, said Mykhailo Gonchar, an energy expert who is the head of the Strategy XXI Center for Global Studies, a Kiev-based research organization. Apartments might be heated at 60 degrees rather than 72 degrees, he said.

Since the June gas cut-off, Ukraine has been dependent on the goodwill of its neighbors to send some gas coursing backward through pipelines in a process called reverse flow. Those supplies are not enough to cover all of Ukraine's needs, and Gazprom has said they are illegal.

Countries that have agreed to help Ukraine have seen their own supplies from Russia come under pressure. Poland was forced to cut off its shipments to Ukraine for a week earlier this month when Russian gas flows dipped. Hungary announced on Friday that it was ending all gas flow to Ukraine, saying that it had to prioritize its own citizens in the event that the Ukraine-Russia conflict disrupted gas supplies later in the winter.

Korniienko, the computer programmer, said that he had traveled home to western Ukraine -- a six-hour drive away -- to take a bath at his parents' house. Other friends in Kiev who have purchased their own electric water heaters have offered to let him shower at their places occasionally.

"It's not comfortable, but there's no choice," he said.