Gazprom Says Ready to Accept Short-Term Gas Transit Deal with Ukraine

Gazprom is willing to go with a short-term extension of its gas transit contract with Ukraine, the Russian gas giant’s CEO Alexey Miller said on Thursday after talks with Ukraine and the European Union, according to Reuters

“There is a risk that Ukraine will not be able to… create an independently certified gas transit operator, an independent regulator, before Jan. 1, 2020,” Miller told the Rossiya-24 TV channel.

“Today we discussed that… it would make sense to consider a plan B: an extension of the current contract for some short period of time,” Miller said.

Gazprom’s gas transit contract with Ukraine’s Naftogaz, which was the object of arbitrage at a European court, expires at the end of this year and the new one needs renegotiating in light of the court ruling by the Stockholm Arbitration Court.

The negotiations are closely watched as they concern the stability of natural gas supply to Europe.

While tensions between the two neighbors remain, Bloomberg reported there have been signs of warming between Kyiv and Moscow that might make the talks easier and lead to a mutually beneficial result.

“It’s hardly possible to agree on all conditions of future contracts in just one day, there will be many iterations in this process, and bargaining is likely to last until the end of the year,” noted Bloomberg.

Gazprom has been obliged to pay Naftogaz $2.56 billion for failing to supply Ukraine with the agreed amount of natural gas over a period of several years, and also for failing to pay the full transit fees for the gas it did pump in that direction.

The Ukrainian company’s victory was pyrrhic, however: of the original $4.63 billion in payments due by Gazprom, the Stockholm court ruled that only $2.56 billion would actually be paid out to Naftogaz, as Naftogaz had previously been ordered to pay about $2 billion to Gazprom for arrears. The court also obliged Naftogaz to buy 5 billion cubic meters of natural gas from the Russian company annually starting in 2018.