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The grey zone: will Russian gas transit through Ukraine continue after 2024

Storozhev Andrey S. Expert

Forbes published an article by Andrey Storozhev, a senior expert at the Economic Department at the Institute for Energy and Finance, entitled "The Gray Zone: will the Russian gas transit through Ukraine continue after 2024".

According to Andrey Storozhev, regardless of the events development in the Kursk region, the transit agreement ends at the end of 2024, and the Ukrainian authorities have repeatedly stated their unwillingness to conclude a new contract with Gazprom. But they also do not want to abandon the use of the gas transportation system and receive transit income in Ukraine: There are talks about a possible replacement of Russian gas with Azerbaijani, but so far these plans are far from reality, because Azerbaijan does not have free gas resources — all volumes are contracted for supplies to Turkey and the EU, and the capacity of the Baku-Novo-Filya gas pipeline running to the Russian border is only 10 billion cubic meters. And in any case, this route cannot work without Russia's consent.

The Russian authorities are ready to extend the transit agreements. But, since it is impossible to imagine a direct agreement between Moscow and Kiev now, various options are being discussed, for example, concluding agreements with European companies with the transfer of ownership rights to gas on the Russian-Ukrainian border or switching to short-term contracts. This is beneficial for Gazprom, since obligations are shifted to a third party and there is no case of "Retention" when the court, referring to the terms of the contract, theoretically can force the Russian company to pay for transit, which does not exist.

The question is the EU's readiness for such transit formats. Currently, Gazprom's supplies via the Ukrainian route are important only for a few EU countries. Imports from Russia account for over 80% of total gas consumption in Austria and more than 90% of gas demand in Slovakia, small volumes are sent to other countries — Italy, Bosnia and Herzegovina. These countries plan to switch to other suppliers, but are unlikely to do so in the next few months. For example, Austria plans to abandon Russian gas by 2027. So, although the chances of extending transit after 2024 remain, there is less and less time for negotiations, and another force majeure at the border will clearly not accelerate them.

Storozhev Andrey S. Expert
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