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Russia And Ukraine Finally Agree On New Gas Transit Deal

Russia and Ukraine reached on Thursday an agreement ‘in principle’ on the transit of Russian gas through Ukraine and onto Europe, European Commission Vice President Maros Sefcovic said at the end of hours of trilateral Russia-Ukraine-EU talks in Berlin.  

Sefcovic and the Russian and Ukrainian ministers of energy, Alexander Novak and Oleksiy Orzhel, respectively, did not announce details of the deal at the briefing during which they announced the agreement ‘in principle’, because the deal needs to be finalized in Russia and Ukraine.

The new agreement, struck days before the previous deal is set to expire at the end of this year, is a positive development for Europe’s gas security, Sefcovic said.

“After these very intensive talks I am very glad to say that we reached an agreement in principle on all key elements which I believe is very positive news for Europe, for Russia and Ukraine,” Sefcovic said.

The current ten-year gas transit deal between Russia and Ukraine expires on December 31, 2019. The parties needed to reach a new agreement by that date to set the terms of deliveries of Russian gas to Europe via Ukraine’s territory.

The talks between Ukraine and Gazprom on the gas transit to Europe have been complicated by the tense relationship between Ukraine and Russia.  

Several rounds of trilateral talks on a new transit agreement between Russia, Ukraine, and the European Commission have been held since mid-2018.

Meanwhile, Russia has been building pipelines to Europe and Turkey that bypass Ukraine—TurkStream and Nord Stream 2. Ukraine, for its part, is a key transit country for Russian gas westwards to Europe and relies on the gas transit fees.

Russia and Ukraine have also been locked in a legal dispute over past transit fees, and this dispute has been one of the hurdles to a new gas transit agreement.

Moscow has offered Ukraine US$3 billion to settle the legal dispute, a source close to the Russia-Ukraine talks told Reuters on Friday.

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By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on December 20 2019 said:
    This is a very good news for both Russia and Ukraine and also for the security of Russian gas supplies to the European Union (EU).

    It could lead to a reduction of tension between the two countries and real economic benefits for Ukraine in terms of continued Russian natural gas shipments through its territory to the EU thus enabling it to continue earning billions of dollars in transit fees. It could also lead to a final settlement of a legal dispute between the Russian giant gas company, Gazprom, and Ukraine.

    And while Russia is building two underwater gas pipelines: Nord Stream 2 and Turk Stream to ensure secure and bigger supplies of gas to the EU, it still benefits a lot geopolitically and economically from having another well-trodden route through Ukraine to ship its gas to the EU.

    In the final analysis, the agreement generates a lot of goodwill between Russia, Ukraine and the EU.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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