"Zero option": Gazprom called the conditions for the extension of gas transit through Ukraine

On Friday, October 18, Gazprom CEO Alexei Miller and Russian Prime Minister Dmitry Medvedev held a working meeting, during which, among other things, they discussed issues related to gas transit through Ukraine.

Miller told the head of government that Russia’s position was brought to the Ukrainian partners on the need to resolve all legal disputes before concluding a new transit contract. According to him, we are talking about the decision of the Stockholm court, which introduced an imbalance in the agreements with Ukraine on the transit and supply of gas to the country, as well as the so-called antitrust case against Gazprom.

“An absolutely contrived story - for one simple reason that Gazprom does not carry out any transport activity in Ukraine. Of course, international practice knows examples where disputes of companies were settled in a pre-trial order, and we offer such a zero option that would completely stop all lawsuits, all claims would be withdrawn and the line under this whole story would be drawn, ”Miller said .

He also stressed that Kiev should “give a clear and clear answer” about whether to buy Russian gas and in what volumes.

“At the same time, we must understand that our deliveries will, of course, be much cheaper than reverse supplies from Western Europe - this is practically the same Russian gas. And we said that the price of gas for end consumers in Ukraine for direct deliveries can be up to 20% minus in relation to the current level, ”said the Chairman of the Board of Gazprom.

Miller also emphasized that Ukraine’s transition to the Third Energy Package is still far from complete. This prevents Moscow and Kiev from concluding a new gas transit contract within the framework of European law, as it has not yet been implemented. In this regard, he recalled that the only option for Kiev would be to extend the current agreement to bring prices to the levels that are now on the market.

“We are in contact with them, and the questions that are asked are known to them. The ball is on the Ukrainian side, ”Miller emphasized, speaking about the need for Ukraine to create an independent gas transportation operator and an independent regulator.

Earlier, the head of the board of NAK Naftogaz Ukrainy Andriy Kobolev indicated that he saw no reason in extending the current transit contract with Moscow.

• Russian Prime Minister Dmitry Medvedev and Gazprom CEO Alexei Miller
• © Dmitry Astakhov / RIA News

Recall that a month ago in Brussels the next round of trilateral negotiations (Russia - Ukraine - European Commission) on gas transit through the Ukrainian gas transportation system took place. The current contract expires on December 31, 2019. The parties noted the progress in the negotiations and the constructive nature of the meeting. Later in Moscow they indicated their readiness to work in accordance with European legislation, but did not exclude that a temporary extension of the current gas transit contract could become a backup option.

At the same time, the Ukrainian state-owned company Naftogaz calculated tariffs for the next five years (2020–2024) for gas transit to Europe through Ukraine. Moreover, the price depends on the volume of reservation of transit capacities of the gas transmission system of Ukraine. As experts noted, the tariffs proposed by Kiev are significantly higher than the deliveries on alternative routes.

In addition, Naftogaz’s executive director Yuri Vitrenko announced a “reasonable demand” for Gazprom to unblock the ability to receive gas from Turkmenistan and from Russian independent producers at the border.

European price markup

According to the director of the Energy Development Fund Sergey Pikin, the Russian side has repeatedly pointed out that it is more profitable for Ukraine to have a contract with Gazprom, but the fact is that Kiev has been trying to demonstrate its independence in the energy sector over the past years, which leads to an overpayment for " European "gas that came to the continent from Russia.

“It has been repeatedly stated that we are ready to supply cheaper, there is nothing particularly new here. And then a certain political component arises, Ukraine rejects all proposals and statements, buying European gas and thereby showing its independence from Gazprom, although everyone understands that the reverse is coming from Russian gas, ”the expert explained in an interview with RT.

In turn, the leading expert of the National Energy Security Fund, a lecturer at the Financial University under the Government of Russia, Igor Yushkov, stated that Kiev has overpaid the last four years by acquiring Russian energy sources on the reverse from Europe.

“Ukraine does not have to lower the price of direct deliveries. It is important here to separate Ukraine as a country and its consumers from management and gas companies. Since 2015, they have not directly purchased gas from Gazprom. They buy the same gas, but from European intermediaries. Gazprom hands it over to European traders, who resell it to Ukraine. These intermediaries are likely to take just about 20% of the price difference. Therefore, if Ukrainians return to direct purchases from Gazprom, then, of course, the price will be lower, ”the source said.