Russia-Ukraine Finalize Key Gas Deal

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Russia Gas Deal

Russia’s Gazprom and Ukraine’s Naftogaz finally reached a deal on the transit of Russian natural gas through Ukraine to Europe.

TASS quoted Gazprom chief executive Alexei Miller say saying, “After continuous bilateral talks, which lasted for five days in Vienna, final decisions and agreements have been reached. We have signed a number of agreements and contracts, and they are in reality a significant package deal, which has restored the balance of interests of both sides.”

There was concern in Europe that the two may fail to reach an agreement that would affect Russian gas deliveries to Europe given the tense political relations—and legal disputes—between the neighbors but, once again, pragmatism seems to have prevailed.

The good news for Ukraine, for whom gas transit fees are vitally important, is that the agreement includes stipulations about guaranteed volumes of gas that Gazprom will send across Ukraine. These are 65 billion cubic meters for 2020, falling to 40 billion cubic meters for the period between 2021 and 2024.

The good news for Gazprom is that Naftogaz will waive its claims to the 2009 contract between the companies as would Gazprom itself. The waivers might finally put an end to the legal saga that has been dragging for years. During these years, Naftogaz accused Gazprom of failing to supply the agreed volumes of gas while Gazprom accused Naftogaz of not paying for all the gas it received.

“The withdrawal of all existing appeals and claims on behalf of both sides” was part of the terms of the five-year contract, the executive director of Naftogaz, Yury Vitrenko said.

BNN Bloomberg quoted Ukraine’s president, Volodymyr Zelensky, as saying that under the new contract, Kiev will receive some $7 billion from transit fees.

According to Reuters in Russia, Gazprom has a 36-percent share of the European natural gas market, with European exports outside the former Soviet Union averaging 200 billion cubic meters. Of this, 86.8 billion cubic meters were transited through Ukraine last year.

By Irina Slav for Oilprice.com

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