INTERVIEW: Will Russia and Ukraine sign a new gas transit contract?
By Tural Heybatov
Interview of News.Az with the leading analyst of the National Energy Security Fund, expert of the Financial University under the Government of the Russian Federation, Igor Yushkov.
- Ukraine makes rather contradictory statements; they periodically change their tone a bit, but in general, they say that there will definitely be no extension of the existing contract. Initially, they used exactly this wording. Various politicians, including the Minister of Energy and the head of Naftogaz of Ukraine, constantly repeated that the current contract will not be extended. However, Gazprom is also not interested in an extension, as the contract is unprofitable for them due to stringent conditions. Additionally, both sides have mutual claims regarding the fulfillment of the current contract, making its extension unlikely.
- What are Gazprom's main claims against the Ukrainian gas transmission system operator?
- Gazprom accuses the operator of the Ukrainian gas transmission system of violating its right to choose the delivery route. According to the contract, Gazprom has the option to select the route, but in 2022, Ukraine blocked the southern route, which passes through the territory of the Luhansk People's Republic (LPR). The main transit volumes went through this route. Despite the pipeline being undamaged, Ukraine daily refuses Gazprom's request to pump through the southern route, leaving only the northern route through the Sudzha gas metering station, where Gazprom can supply a maximum of 42.4 million cubic meters of gas per day.
- What are the prospects for signing a new contract after the current one expires?
- A new long-term contract may not be necessary to maintain transit. Since 2019, Ukraine has implemented European legislation in the field of gas transportation, which obliges it to conduct regular auctions for transit capacities. Gazprom has always been the sole participant and winner of these auctions. Thus, conducting auctions without the need for a long-term contract will be the most advantageous option for Gazprom.
- What difficulties might arise in signing a new long-term contract?
- Politically, it will be difficult for Ukrainian authorities to justify signing a long-term contract with Russia. Constant accusations against Russia create an unfavorable atmosphere for such agreements. Political competition in Ukraine and accusations of treason make signing a long-term contract risky for any politician. At the same time, the auction system does not require a signing ceremony or specific responsibility, making it more acceptable to all parties.
- Under what conditions can Russia continue gas supplies through Ukraine?
- For Russia, it is important that the new contract is not as stringent and contentious as the current one. Gazprom finds the regular auction system for transit capacities most advantageous, as it is a flexible system allowing for increased volumes as needed. If Ukraine reopens the southern route, Gazprom will be able to pump even more. However, political settlement and the beginning of dialogue between Russia and Ukraine could also facilitate the signing of a new long-term contract.
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