HomeMediaLatest NewsThree years before the end of the contract with Gazprom, Kiev is afraid to be left without gas from Russia

Three years before the end of the contract with Gazprom, Kiev is afraid to be left without gas from Russia

13 July 2021

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department

Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented on the prospects for the Russian gas transit through the territory of Ukraine to the Economics Segodnya FBA.

Merkel once again made it clear that Germany supports Nord Stream 2, provided that the minimum volumes of Russian gas transit through Ukraine are maintained. As for any excess volumes, this issue will be decided by Moscow and Kiev, in whose commercial relations Berlin will not interfere, Alexei Gromov, Energy director of the Institute for Energy and Finance said in a conversation with the Economics Segodnya FBA.

German Chancellor Angela Merkel, during a meeting with Ukrainian President Volodymyr Zelensky, said that the launch of the Russian Nord Stream 2 gas pipeline would not stop the transit of gas to Europe through Ukraine.

Merkel recalled the principles of Germany

Merkel expressed confidence that the German Chancellor, who will be determined by the results of the elections to the Bundestag on September 26, will fulfill the promises made to Kiev to continue the transit.

The head of the Germany Ministry of Finance Olaf Scholz announced in July that Germany would seek an extension of the gas transit agreement between Ukraine and Russia.

The construction of the second string of the Nord Stream 2 gas pipeline, according to forecasts, will be completed by the end of August this year, the laying of the first string was completed in early June. The process of technical acceptance and examination has already begun. Project readiness is 98%.

President Volodymyr Zelenskyy has repeatedly spoken out against Nord Stream 2, seeing in the commercial project a threat to security for Ukraine and the European Union. In addition, Zelensky believes that Nord Stream 2 will deprive Ukraine of the opportunity to earn money on the transit of Russian gas.

“Merkel’s statement does not look like a sedative for Zelensky, but as the principled position of Germany and the German political establishment, which the chancellor herself and her inner circle have repeatedly stated,” Aleksey Gromov explains. - Nord Stream 2 will work successfully only if Russia ensures at least a minimum level of gas transit through the territory of Ukraine in accordance with the signed agreement. If Russia does not fulfill the current agreements, then Germany will refuse to support and operate Nord Stream 2”.

The expert believes that today it is important for Russia not to aggravate relations with Germany - the only country in Europe that unconditionally supports the project and resists any pressure to stop it or to use it in the future, which the United States and Ukraine would like.

"Merkel once again makes it clear that Germany supports Nord Stream 2, but with clear conditions that presuppose the preservation of the same volumes of Russian gas that were fixed in the current transit agreement between Gazprom and Naftogaz," Gromov stressed.

Excess volumes will remain at the discretion of Gazprom

Until 2024, there is a contract between Gazprom and Naftogaz, according to which the Russian company is obliged to pump through the territory of Ukraine at least 40 billion cubic meters of gas per year, which will completely stabilize the country's position in the foreseeable future.

A similar situation was with Poland, the contract with which ended in May 2020, after which Gazprom switched to an auction system for booking capacities.

At the beginning of July, Gazprom did not book capacity for the next gas year from October 1, 2021 to October 1, 2022 through Poland and Ukraine at auctions. Market players explained the situation by the fact that Gazprom, despite accusations of gas blackmail, delivered a record 99.99 billion cubic meters of gas to foreign markets in the first six months of this year. The company made the previous record in the first half of 2018, supplying 101.5 billion cubic meters of gas to foreign markets.

“As for any excess volumes in supplies, this issue concerns the relationship between Russia and Ukraine. Germany will not interfere in their commercial relations, - Gromov comments. “This year, when Europe needed additional gas volumes, Gazprom did not complete the Ukrainian gas transportation system, since this is already beyond the scope of the signed contracts and political agreements, remaining at the company's full discretion.”

Poland, in principle, did not want to sign a long-term contract with Gazprom, but at the same time had a need for Russian gas, the expert explained. Therefore, it was offered a European gas trading mechanism based on auction principles. Poland considered this option more profitable for itself, since, in the opinion of Polish politicians, Warsaw was freed from excessive dependence on Moscow.

In Ukraine, the situation developed exactly the opposite. It would be profitable for Gazprom to switch to the auction scheme, because in this way the company itself could avoid excessive dependence on Ukrainian transit. The long-term contract is a direct interest of Ukraine, since in any case it guarantees certain volumes of pumping of Russian gas.

Europe will support Ukraine in preventing Gazprom from switching to auction supplies and extending a long-term contract with Kiev, which expires in three years. It is not necessary that the contract can be for 10-15 years, but Europe will require at least for five or six years, the expert concluded.

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department
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