Russia and Ukraine on the brink of gas war

07/11/2019 10:42 Natural Gas


After December 31, gas transit through Ukraine will continue under the following conditions: resumption of direct purchases of Russian gas and zeroing of mutual legal claims. It is about the Ukrainian side’s waiver of the claim for almost 22 billion dollars. This was recently announced by the head of Gazprom, Alexey Miller, during a meeting with the German government’s commissioner for gas transit through Ukraine.

“Since last year, Naftogaz has been waiting for the payment of two and a half billion dollars, which was awarded to the Ukrainian company by the Stockholm arbitration. Another 7 billion is a fine and penalties for non-payment from the Antimonopoly Committee of Ukraine starting from 2016. And on November 2, on the eve of the meeting with German regulators, a new lawsuit for 12 billion dollars was filed with the same arbitration court.

After that, the tender for transit will reach a new level. For Gazprom, the Ukrainian route will remain profitable only if Kyiv maintains high volumes of purchases, and the main gas flows will take place far away from the Ukrainian border. That is, it may happen that from July Naftogaz will be more interested in the transit than Gazprom.

As experts explain, Ukraine cannot drop the lawsuits simply because then it will not be able to fulfill its obligations to Europe and complete the so-called unbunding of Naftogaz. We are talking about the restructuring of this state-owned company and its division, according to the requirements of European regulators, into a supplier and a gas transmission network operator.

So, the process of the country’s integration into the EU would also stop. But the expert of the Energy Strategy Fund believes that it is more profitable for the country’s residents to accept Russia’s conditions than to continue the reform process.

However, so far there have been no signs that Kyiv will agree to Moscow’s terms. The other day, President Volodymyr Zelensky issued an order to complete the procedure of separation of the Ukrainian gas transportation system from Naftogaz by 31 December 2019.

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