Ukraine’s state-run energy company, Naftogaz, has announced that it will not extend its gas transit agreement with Russia. The current contract between Naftogaz and Russian energy giant Gazprom is set to expire at the end of next year. Aleksey Chernyshov, the head of Naftogaz, stated that they have no intention of continuing the transit and that the contract will come to an end.
According to Chernyshov, Ukraine has grounds to terminate the contract ahead of schedule, as Gazprom has allegedly paid only 70% of what it owes for transit. However, Ukraine has decided not to scrap the existing contract immediately in order to avoid leaving European consumers without gas supply during the upcoming winter months.
The transit agreement between Gazprom and Naftogaz was last extended in 2019, with the possibility of further extension until 2024. Following the sabotage of Russia’s Nord Stream pipelines last year, the transit route through Ukraine remains the only option for Russian gas to reach Western and Central Europe. However, Gazprom continues to supply gas to Southern and Southeastern Europe through pipelines like TurkStream and Blue Stream.
While Russian gas flows to the EU have decreased due to sanctions and technical challenges, several EU countries still heavily rely on Russian supplies. Hungary, in particular, has expressed its intention to continue purchasing Russian gas to meet its energy needs. Hungarian Foreign Minister Peter Szijjarto recently stated that Budapest is open to discussing alternative avenues for Russian gas imports, including the possibility of increasing supplies through TurkStream.
The reduction in Russian gas supplies has led to a sharp increase in EU gas prices, causing inflation and a cost-of-living crisis in many member states. Moscow has repeatedly warned that excluding Russian energy exports only harms the EU’s own people and industries. When reports of Ukraine’s plan to end the transit contract first emerged, Russian Deputy Foreign Minister Mikhail Galuzin criticized the move, stating that it would deal a blow to the EU and result in Ukraine losing dividends from transit.
Despite Ukraine’s decision not to extend the gas transit agreement, there are alternative options available for Russian gas supplies to reach European consumers. The capacity of the Turkish Stream pipeline, for example, is significant, and it can easily deliver the volume of gas secured in the long-term contract with Gazprom to countries like Hungary. Currently, Hungary receives 1 billion cubic meters of Russian gas through TurkStream and 4.5 billion cubic meters via the Ukrainian transit line.
In conclusion, Ukraine has announced that it will not extend its gas transit agreement with Russia. While this decision may have implications for European gas supplies, alternative options such as the Turkish Stream pipeline can ensure the continued delivery of Russian gas to countries like Hungary. The expiration of the transit contract at the end of next year will require stakeholders to explore new arrangements to meet the energy needs of both parties involved.
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