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UKRAINE: Russia Threatens to Reroute Gas from Ukrainian Transit Pipelines

Bottom Line: Though small in volume, Ukraine’s launch of gas imports from Europe is spurring a response from Moscow which is essentially to cut Ukraine’s gas transit potential. 

Analysis: Last week, the Russian president and Gazprom announced a series of deals, including the construction of a third parallel connector to the Nord Stream pipeline on the Baltic seabed running to Western Europe and potentially supplying gas to the Netherlands and the UK, and a redesign of the South Stream pipeline to include four parallel connectors under the Black Sea.

More significantly for Ukraine, the plans also include the construction of a new pipeline from Belarus through Poland and Slovakia, connecting up with Slovakia’s gas corridor. This corridor handles the bulk of Russian gas supplies to the European Union as it is the one that picks up from Ukraine’s gas transit pipelines. The new plan is to cut Ukraine out of this transit by sending the gas to Slovakia via Poland, from whence it would make its way to Central and Western European markets. It is the specter of this pipeline that has Kiev somewhat worried. Ukraine needs its transit fees as it seeks to develop its own energy independence. This is the new game Gazprom is playing to pressure Ukraine. The proposed Russian pipeline would divert 15bcm annually from Ukraine.

Recommendation: In following this game, we recommend considering that Russia actually may have no real intention…




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