Merkel warns of drastic measures if no progress in Ukraine

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Deputy Chairman Alexander Medvedev said on Friday Russia's Gazprom sees no impact from a proposal by Kiev to allow gas transit facilities to be leased on a joint venture basis with participation from firms in the European Union or United States.

Ukraine's parliament decided to discuss a bill outlining the proposal after Moscow cut off gas supplies to Ukraine on June 16 following Kiev's failure to pay off some of its gas debts to Moscow.

"It won't anyhow affect us. But let's not forget that Ukraine pipeline's system age is over 35 years with no needed investments done," Medvedev told reporters.

Gazprom said its gas flows to Europe via Ukraine increased on Friday despite a pricing standoff between Moscow and Kiev.

Russia used to ship around three-quarters of its gas exports to Europe via Ukraine. But the share has declined after it launched the Nord Stream pipeline with an annual capacity of 55 billion cubic meters (bcm) via the Baltic Sea directly to Germany in 2011.

Gazprom now plans to build the South Stream pipeline to gas to Europe across the Black Sea in 2015 with a view to increasing its annual capacity to 63 bcm by 2018-2019 despite opposition from the EU, which says the project does not meet its regulations.

"After we build South Stream, taking into account Nord Stream and other routes, there will be almost no need left to use Ukraine's gas pipeline system," Medvedev said.

Earlier on Friday, Ukraine signed a free-trade and political cooperation agreement with the European Union that has been at the heart of the country's political crisis, drawing an immediate threat of "grave consequences" from Russia.

Georgia and Moldova signed similar deals, holding out the prospect of deep economic integration and unfettered access to the EU's 500 million citizens.

"Over the last months, Ukraine paid the highest possible price to make her European dreams come true," Ukrainian President Petro Poroshenko told EU leaders at a signing ceremony in Brussels.

Russia immediately said "grave consequences" would follow.

Ukraine's former pro-Moscow President Viktor Yanukovich turned his back on signing the EU agreement last November in favor of closer ties with Moscow, prompting months of street protests that eventually led to his fleeing the country.

Soon afterwards, Russia annexed Ukraine's Crimea region, drawing outrage and sanctions from the United States and EU.

Positions

German Chancellor Angela Merkel warned that the European Union would respond decisively if there were not quick progress in implementing Ukraine President Petro Poroshenko's peace plan.

"We expect progress in the next hours. If we don't see any steps forward on any of the points then we are also prepared to take drastic measures," she told journalists in Brussels.

REUTERS

Merkel warns of "drastic measures" if no progress in Ukraine