Economy

Ukraine refuses to renew deal on Russia’s gas transit to the EU

Ukrainian Energy Minister German Galushchenko told POLITICO that Kyiv is unlikely to renew a gas transit agreement that permits Russia’s Gazprom to export natural gas to the EU using pipelines that pass Ukraine.

The 2019 transit agreements allow Gazprom to export more than 40 billion cubic metres of gas annually through Ukraine, bringing in an estimated $7 billion for Kyiv. These agreements extend until the end of 2024.

In a phone conversation, Galushchenko stated, “I think Europe won’t need Russian gas at all by the winter of 2024.” 

The only thing Russian gas profits should pay for moving forward is reparations if they are now funding Russia’s war of aggression against Ukraine and Gazprom’s private army. 

The war, he continued, makes “bilateral negotiations impossible.”

One of only two pipeline connections connecting Russia and the West is by land through Ukraine. It still makes up around 5% of the gas the EU imports, but that’s a third less than before the war.

The future of gas transfer is being questioned by more than just Ukraine.

Gazprom-Naftogaz disagreement

The head of Gazprom, Alexei Miller, warned last week that if Ukraine doesn’t stop trying to confiscate Russian state assets to enforce a $5 billion award for the energy infrastructure Moscow illegally expropriated when it occupied Crimea in 2014, his company will stop exporting. 

A disagreement over transit fees has also caused a rift between Gazprom and Ukraine’s Naftogaz.

“Sanctions by the Russian Federation cannot be ruled out if Naftogaz continues its unfair practices. After that, any interactions between Russian businesses and Naftogaz will be impossible, according to Miller, quoted by the Russian TASS propaganda news agency.

Where does Russian gas go?

The network of pipes has continued flowing gas to the EU, with most of it ending up in Austria, Slovakia, Italy, and Hungary, despite bombs, missiles, and drones causing havoc on the Ukrainian energy infrastructure.

Although the European Commission wants to remove the EU’s dependence on Moscow’s fossil fuels by 2027, sanctions do not apply to Russian pipeline gas.

The EU nations that continue to use Russian gas are subject to mounting criticism for not diversifying their energy sources quickly enough.

Russian gas imports to Austria have returned to their pre-war levels. Every year, Hungary receives about 4.5 billion cubic metres. To ensure additional volumes, its administration agreed to an agreement with Gazprom in April.

Probable consequences for cutting off Russian gas

For such nations, the gas deal’s termination by Ukraine could be problematic.

According to a June research by Columbia University’s Centre on Global Energy Policy, Gazprom pipeline gas supply to EU countries might fall to between 10 and 16 billion cubic metres (45 to 73 percent of present levels) if Ukrainian transit stops. 

In 2025, before new liquefied natural gas production from the United States and Qatar is available, Europe might experience a shortage. However, in the medium term, it can replace Russian energy supplies to Europe.

On the other hand, according to Oleksiy Chernyshov, CEO of Naftogaz, Ukraine aims to increase domestic gas production to meet EU demand in the long term.

So, a blockage of Russian gas transit to the EU countries and energy supply replacement would signify a potentially more lasting rupture with Moscow.

Alex Khomiakov

My passion for journalism began in high school, and I have since devoted my career to reporting on issues that matter to people around the world. I believe that journalism has the power to effect real change in the world, and I am passionate about using my platform to give voice to those who are too often overlooked.

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