Details Emerge of Ukraine-Russia Gas Transit Agreement

21 December 2019 14:26

Details of the agreement between Ukraine and Russia on gas transit were revealed at a joint energy ministry and Naftogaz briefing on December 21.

the parties will conclude a 5-year contract with the possibility of prolongation on the same terms for another 10 years;
the minimum guaranteed volumes of gas transit in 2020 are 65 billion cubic meters for 2020, 40 billion cubic meters a year from 2021 to 2024, subject to a competitive tariff (the gas transit contract, which ends this month, stipulates that Gazprom is guaranteed to supply 60 billion cubic meters a year to Europe via Ukraine, with the potential to increase up to 90 billion);
the Russian side will pay Naftogaz about $3 billion as ruled by the Stockholm Arbitration by the end of 2019;
Ukraine drops new claims and withdraws a number of lawsuits against Gazprom, including one for $12.25 billion;
the return of Naftogaz's assets in the occupied Crimea was not discussed — this issue will be settled by The Hague Arbitration.

Interfax first reported that Gazprom agreed to pay $3 billion of debt to Naftogaz as per the decision of the Stockholm Arbitration on December 20.

Moreover, the text of the protocol of the December 20 meeting in Minsk states that "the Antimonopoly Committee of Ukraine should cancel Gazprom's fine for a total of more than $7.4 billion" under the arrangements to continue gas transit.

The issue of repayment of Gazprom's debt awarded by arbitration was one of the key issues in the transit talks. Earlier, Russia insisted that Naftogaz forgoes its arbitration requirements as a prerequisite for the start of negotiations. Subsequently, Russia included this issue in the so-called “package arrangements”, which also included a renewal of direct gas supplies to Ukraine.

Ukraine's Energy Minister Oleksiy Orzhel also announced that the two countries have agreed on the potential resumption of direct Russian gas supplies to Ukrainian consumers. Kyiv hasn't bought gas directly from Gazprom for 4 years. At the same time, Orzhel stressed that the protocol only provides the principles on which deliveries can be made, but the document does not oblige Ukraine to buy Russian gas.

"Subject to the full implementation of the agreements [...] the parties will consider supplying gas to Ukraine in accordance with the principle of pricing on the basis of the European Hub (NCG), less a reasonable discount taking into account the volume of such supply," the protocol reads.

It is important to note that the signing of a protocol does not mean that a gas transit contract has been concluded. The protocol only attests to the agreement of the parties.

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