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21 Dec, 2019 13:25

What we know so far about Russia-Ukraine gas transit deal

What we know so far about Russia-Ukraine gas transit deal

After multiple rounds of talks, Russia and Ukraine have finally hammered out an extension to the current gas agreement that is set to expire at the end of the year.

While the agreement “in principle” was reached earlier this week, the sides revealed the key points on Saturday. Here are the details of the breakthrough deal. 

Terms of agreement

The new contract will ensure gas supplies to Europe for the next five years, and the deal might be further prolonged for another ten years. The deal stipulates the transit of 65 billion cubic meters of gas next year, and 40 billion cubic meters per year for the rest of the time, from 2021 through 2024, judging by the transport capacities booked by Gazprom.

The transit tariff is set to be raised due to the reduction of volumes of transported gas, but the final price will be determined by an independent regulator. The Russian energy giant says that it expects transit fees to be competitive and be based on European rules.

While the deal does not include direct gas supplies from Russia to Ukraine, Russia’s Gazprom and Ukraine's Naftogaz may consider the issue, the protocol of agreement says. Russia is ready to sell the blue fuel under the pricing of the European NCG platform, and is even ready to offer a discount, but it depends on the supply volumes. 

End of legal battles

The deal also is set to settle the long-standing legal rows between Ukrainian and Russian energy companies. The sides have agreed to drop existing arbitration and legal claims that did not result in final decisions, and not to open new ones. 

Thus Kiev will withdraw its $7.4 billion anti-monopoly claims against Gazprom. Back in 2016, the Antimonopoly Committee of Ukraine fined Gazprom for allegedly abusing its monopoly position in the gas transit market with 86 billion hryvnia (around $3.6 billion), but the sum rose nearly twofold due to different fines and penalties.

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In exchange, Russian gas giant Gazprom announced it would pay Kiev $2.9 billion as ruled by the Stockholm arbitration court. Last year, the court ruled that the Russian energy company must pay Ukraine’s Naftogaz for a shortfall in the delivery of gas to Ukraine.

However, the protocol does not mention Naftogaz’ claims for compensation for assets in Crimea, as the company lost control over them after the peninsula reunited with Russia. The Ukrainian company wants Russia to pay off $5.2 billion damages. 

When it will be finally signed?

While some technical talks on the implementation of the agreements are still ongoing, both sides hope to finalize the deal before the year’s end. Before the sides ink the document, Gazprom will have to pay off its debt to Naftogaz, while the latter is set to withdraw the agreed outstanding claims . 

“We must sign everything before December 29 so that there will be transit from January 1,”  Executive Officer of Naftogaz of Ukraine Yury Vitrenko said on Saturday.

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