Moscow, Kiev Clinch Final Gas Deal ahead of New Year

Russian and Ukrainian companies on Monday signed the final version of a five-year agreement on the transit of Russian gas through the neighboring country, AP reports.

The deal comes after months of difficult talks and just ahead of a looming New Year deadline, which could have caused gas shortages in Europe.

The current gas transit deal between the two ex-Soviet countries expires Tuesday and ties between them have been shredded since Moscow annexed Crimea in 2014 and supported a separatist insurgency in eastern Ukraine.

Some 18% of the European Union’s annual natural gas consumption comes from Russia via Ukraine, putting additional pressure on EU officials who helped to broker the deal.

“Ukraine has signed a five-year transit contract,” Ukrainian President Volodymyr Zelensky announced on his Facebook page, nearly two weeks after a provisional deal was agreed.

“A whole complex of documents has been signed,” allowing “the transit of gas after 31 December,” Alexei Miller, the boss of the Russian gas giant Gazprom told Russian media.

It is expected that Gazprom will transit at least 65 billion cubic meters of natural gas via Ukraine next year, then at least 40 billion per year from 2021 to 2024, said Zelensky, earning Kyiv “more than seven billion dollars”.

Other details unveiled by Ukraine’s Naftogaz include the $2.918 billion compensation paid by Gazprom under the Stockholm Arbitration Awards of December 2017 and February 2018, which was received by Naftogaz on 27 December 2019, as well as a withdrawal from all arbitration proceedings where final decisions have not been rendered yet.

Last year Russian gas giant Gazprom supplied Europe with 200.8 billion cubic meters of natural gas, with about 40% going through Ukraine, earning the country around $3 billion a year in transit fees.

Russian President Vladimir Putin said earlier this month that Moscow wanted to keep some gas flowing through Ukraine, despite having built several pipelines to Europe since the current deal was agreed a decade ago.

Russia’s gas pipelines include the U.S.-sanctioned Nord Stream 2 project due to be completed by the end of next year, which seeks to double gas volumes to Germany.