What is the future of gas transit through Ukraine?

Какое будущее газового транзита через Украину?

Kiev and Moscow are in Brussels trying to start a dialogue about the fate of our gastransport system after the current contract.

On Monday in Brussels held a trilateral meeting of representatives of Ukraine, Russia and the European Union, on which discussions began on the fate of Russian gas transit through the territory of our country after 2019 – it will end the current contract. Any specific decisions from the meeting was not expected, but the prospects for the relationship between the parties in 2020 are already looming.

Stalled “Nord stream-2”

The gas issue is a stumbling block in relations between Kiev and Moscow last fifteen years. Gas war in the mid-zero, when Russia staged demonstrations tightening the valve in the midst of winters, and then began to build a bypass pipeline around Ukraine, led to the fact that the temperature relations of the parties in the gas issue fell below zero.

Our country is counting down the days for which buys Russian gas, and Russia refuses to pay over 2 billion dollars lost in the Stockholm arbitration claim and all forces directed to the construction of the pipeline “Nord stream-2” which should significantly reduce the transit through the Ukrainian GTS.

Originally it was planned that this pipeline will be completed before the end of 2019, but because of political resistance and threat of sanctions, implementation of the project slowed down. As we would like, but most likely it’ll be done by 2021-2022 year. The major delay will be in the construction of the ground infrastructure.

So while Russia, even while maintaining the current level of gas exports to Europe after 2019, the end of the current contract, without the Ukrainian route is not necessary.

That said, negotiators

In fact, the negotiations in Brussels came to nothing. The parties expressed their wishes for the future and agreed to meet again after the presidential election in may.

Met. Talked. Outlined their positions. Now the stage of discussion and decision-making in the “inner circle” – described the outcome of the negotiations in the Ukrainian “Naftogaz”. – In short, Gazprom offers us forget “the past” and clear mutual claims. Obviously want us to forget about the decision of the Stockholm arbitration and to forgive the debt of $ 2.7 billion.

Our position – the decisions of previous courts should be fully implemented, and the new agreement on transit must conform to European energy legislation. To the Russian habit of not resorted to non-market and non-competitive methods, which it has repeatedly demonstrated in the past.

According to Ukrainian negotiators, the same position is shared by the European Commission (EC).

– We are grateful for the support of the EC, which considers that a new gas transit contract should be long – 10 or more years and provide for such amounts, which may be of interest to Western investors, summed up in Naftogaz. – The EC believes that the contract should contain the volume of transit that “used to provide the Ukrainian GTS”.

In turn, Russian energy Minister Alexander Novak said that Russia is primarily interested in the commercial attractiveness of the project.

-Transit contract will be discussed, but the underlying condition is its commercial appeal. That is the creation of economic conditions that would be competitive in relation to other areas besides the “Nord stream”, “Turkish stream”, said the Minister.

Verbal support

Further support of Ukraine on the words from the European countries it is not. In the same Germany, which in fact is lobbying for the construction of “Nord stream-2”, to all of Ukraine protests meet the soothing phrases. They say, don’t worry, we will oblige Russia to maintain a certain volume of shipments through the Ukrainian GTS. But never was called nor the mechanism for such decisions, nor the possible shipments.

At the end of last year the European Parliament condemned the construction of “Nord stream-2”. But experts called it is also a friendly support.

– In fact, the European Parliament has supported Ukraine rhetorically, says energy expert Dmitry marunich. – Any real levers of pressure on Germany and the companies that participate in the project, of the European Parliament no. Some specific measures can only accept the Commission, but there is the question lately is not raised.

According to experts, the real Europe that can perhaps oblige the owners of the “Nord stream-2” to provide access to the pipeline to third parties.

Much more interesting is the situation with the reaction of the United States, because their resolution provides for sanctions against companies involved in this project.

And recently, the Federal foreign Minister of Germany Heiko Maas has said that the US sanctions cannot stop the implementation of this project. However, he promised to sweeten a little the bitterness of the loss of transit.

“Transit through the territory of Ukraine must be ensured,” said Heiko Mass.

Something similar recently said Vladimir Putin.

“We will upload gas to both Nord stream and “Turkish stream”. But with such a large volume of gas supplies to European consumers persist and its transit through Ukraine’s GTS. The ability to save the transit of Russian gas to Europe via Ukraine will be discussed by the management of Gazprom at the trilateral meeting in Brussels,” – said the Russian President.

What’s next?

In principle, nothing new neither German officials nor the Russian President said. Experts believe that even after the launch of both the Turkish North and the flow of the fuel from Russia to Europe will need to pump through Ukraine. That is sometimes the pipeline will run from East to West, but at the same time, we’ll have to pump the gas to the East.

Now Ukraine supplies Russian gas to Europe. Until the end of 2019 we have a transit contract. For the year we are pumping about 90 billion cubic meters of fuel, for which we get about 3 billion dollars. If Russia implements both of bypass gas pipeline “Nord stream-2” and “Turkish stream”, the transit of Russian gas could be reduced to 15-30 billion cubic meters.

If pumping will be reduced by 3-5 times, the pipeline will have “deploy” and to pump gas from Europe towards the Eastern border. Therefore, experts suggest now to work on back-up mechanisms.

– I think that now you have to think how to optimize the work of the Ukrainian GTS after passing through it will decrease, – said Dmitry Marunych. – Part of the compressor stations will have to close, branches of pipe – too.

As for transit in the next two years, not yet fully launched the “Nord stream-2” and “Turkish stream”, the gas can give right on the border with Russia to the issue of transit was already lying on the European side or the Ukraine. If the volumes are large, it will be a short-term contract until the commissioning of the “Nord stream-2”.