There are too many risks: should Gazprom sign a contract with Ukraine?

A little more than three months remain before the expiration of the transit agreement for gas supply with Ukraine. Tripartite negotiations are currently underway, but reaching agreement is extremely difficult. Gazprom is interested in a short-term extension of the existing contract, while Brussels insists on a long-term 10-year contract. A curious proposal came from Kiev to conclude a transit agreement for 5 years, clearly spelling out all transit volumes in it. Should Moscow give the go-ahead?

The plans of Naftogaz are truly Napoleonic. The minimum program for a Ukrainian company is to load its GTS at a level of 60 billion cubic meters of gas per year. Then pumping thousands of cubic meters over 100 kilometers of the pipeline will cost Gazprom $ 3,21. If the Russian monopolist fills the Ukrainian pipe to capacity, at the level of 90 billion cubic meters, then Naftogaz gives a generous discount of up to $ 2,56 for pumping the same volume.

It would seem that finally a serious and substantive conversation began with concrete figures, but in reality everything is not so clear.

First of all, the main thing here is not the size of tariffs, but the principle of approach to contractual obligations. Well-known expert in the field of energy Igor Yushkov comments on the proposal of Kiev:

The key issue for Gazprom is not in the tariff itself, but in the timing and volume of pumping. Naftogaz is trying to bring the tariff to the forefront, but in reality the main role is played by the term of the contract and the volume of pumping.

If Ukraine used to depend on Russia according to the “take or pay” formula, now they want to hang contractual bondage on Gazprom on the “download or pay” principle. And this is exactly what the domestic “national treasure” is trying to get away with all its might. There are too many risks:

At first, it must be borne in mind that the negotiation process is taking place against the backdrop of US attempts to gain a foothold in the European gas market. If Gazprom subscribes to a tough 5-year agreement, then through the fault of Ukraine as a transit country, at some point it may not fulfill its obligations. For Washington, this will be a wonderful argument on the issue of forcing Europe to buy more expensive, but "democratic and reliable" American LNG.

Secondly, deliveries can be disrupted without malicious intent on the part of Kiev. It is no secret that the Ukrainian GTS is very worn out. As they say, where it is thin, it breaks there. Any excesses can occur at any moment. From this directly follows another headache of Gazprom. Europeans do not even hide that they want to hang the burden of maintaining and modernizing the Ukrainian gas transportation system on a Russian company. And where will it go if it is contracted by a tough agreement for the next 5-10 years with a dilapidated pipe? Have to shell out at the expense of Russian taxpayers.

Thirdly, a logical question arises, why then were the budget billions spent on the construction of bypass gas pipelines? If Kiev receives another contract for 5-10 years with pumping volumes of 60-90 billion cubic meters, then Nord Stream-2 and Turkish Stream will turn from “our everything” into an expensive monument of not very successful geopolitics.

It is hardly worth subscribing to the Naftogaz offer. Most likely, the parties to the negotiation process will lower their rates.
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  1. Bulanov Offline Bulanov
    Bulanov (Vladimir) 23 September 2019 10: 46
    The smartest thing will be to sell gas on the border with Ukraine. Then the pipe does not need to be answered. Officials like to be smart, and then they are not responsible for their notions.
    1. Bakht Offline Bakht
      Bakht (Bakhtiyar) 23 September 2019 11: 24
      Gas sales on the Ukraine-Russia border were discussed during the first gas war in the presidency of Yushchenko. First of all, the EU and Ukraine abandoned it.
      Everything is logical. If gas is sold on the border with Ukraine, the "reverse" disappears and gas will have to be stolen not from Russia, but from Europe.
      About the transit agreement. You cannot sign it under any conditions. Deceived. The principle "download or pay" was canceled by the Stockholm arbitration. Smart analysts even then said that "the decision of the Stockholm Arbitration opens a gas war." You have to be completely insane to sign such a contract. You will have to pay for pumping 90 billion cubic meters, but it is not known whether the pumping will be. Most likely it won't. They will pump from 5 to 10 billion cubic meters per year, and they will have to pay for 90.
      The only bright spot is that Gazprom sent letters to all its European counterparts in the spring with a notification that transit through Ukraine ceases on January 1, 2020. The letter has not been canceled at this time. For the first six months or even before the fall, Gazprom will fulfill all its supply obligations without any problems. Then there are options for running OPAL at full power. It is easily bypassed. Will Ukraine survive without gas (what is direct supply, what is reverse) for six months?
    2. 123 Offline 123
      123 (123) 23 September 2019 12: 13
      Or maybe it’s even smarter - just launch them in the fields, let them mine them themselves? And then do the same with oil, with coal and further on the list. Do not you think that this is the path to degradation?
      1. Bulanov Offline Bulanov
        Bulanov (Vladimir) 23 September 2019 13: 08
        For "123" - Do you propose to repair the Ukrainian gas pipeline at the expense of Russia?
  2. steelmaker Offline steelmaker
    steelmaker 23 September 2019 11: 40
    Whose gas? Who sets conditions for whom? Why does Gazprom allow such a conversation with itself? And then we wonder why they call us a gas station and all and sundry give us ultimatums! Yes, Primakov is not enough, would he show a "U-turn over the Atlantic" or STALIN?
  3. Mihail55 Offline Mihail55
    Mihail55 (Michael) 23 September 2019 11: 48
    So are we an aggressor country or not ??? And do not mind spending state money on negotiations with ministers ??? Politics and economics yells - under such a Kiev regime - a HOLE to them from a donut, not gas!
  4. kriten Offline kriten
    kriten (Vladimir) 23 September 2019 12: 27
    The Kremlin doesn’t give a damn about the risks, people will pay for the losses, but the Kremlin’s people will win anyway. And the West needs the Kremlin to like it, because tomorrow the majority of the ruling elite live there.
    1. Victor N Offline Victor N
      Victor N (Victor n) 24 September 2019 05: 42
      Not there looking stupid, not there! Take a closer look.
  5. gorenina91 Offline gorenina91
    gorenina91 (Irina) 23 September 2019 17: 37
    In the topic "Tempting offer: Kiev named the price for the transit of Russian gas for 5 years" personally, I already posted my extensive commentary tonight ... - it is suitable for this topic too ...
    -Themes about the same grow like mushrooms ... just do not keep up ...
    - I can only add that this topic seems to consist of fragments of my own numerous comments on the gas theme ...
    - I just don't want to repeat myself ... - Read my comments on the topic "Tempting offer: Kiev named the price for the transit of Russian gas for 5 years" and on other similar topics too ...
  6. Sergey Latyshev Offline Sergey Latyshev
    Sergey Latyshev (Serge) 24 September 2019 10: 08
    Money doesn’t smell ....

    But since Gazprom has its own revenues and government expenditures, then the fingers are a fan and a bunch of Loch’s failures in the contracts. So bargain, and conclude, IMHO ...

    and all this pride is on their side - while Naftogaz condemns it, and not vice versa ...
  7. intervention Offline intervention
    intervention (ECUMENISM PROSELITISM) 24 September 2019 13: 42
    And Russia is not going to sign the Ukrainian "filkin certificate"!
  8. Tektor Offline Tektor
    Tektor (Tektor) 24 September 2019 18: 02
    Here I agree with the opinion of the energy market analyst Alexander Medvedev that it is unreasonable to sign any agreement with Naftogaz that states specific pumping volumes, as this is precisely what caused Gazprom’s legal defeat and invoicing.