Nord Stream 2 Controversy: EU-Russia-Ukraine Gas Transit Talks Stalled

Written by | Wednesday, January 30th, 2019

Russia is not interested in finding a common ground in the EU-initiated Ukraine gas transit talks and is using energy as a mean to weaken Kyiv in an attempt to deepen the country’s crisis. “The main geopolitical idea is to hinder Ukraine’s growth by depriving the country of 3 billion US dollars a year. That would make Russia’s life much easier,” said Yuriy Vitrenko, chief commercial officer at Naftogaz, Ukraine’s state-run oil and gas company said.


“That means that instead of the economic growth we have been experiencing in the last couple of years, we will have an economic decline, meaning that the population will say look, we don’t like it, maybe it would be better for us to go back to Russia. That’s what they are trying to achieve,” Mr. Vitrenko also said, referring to the failed negotiations between the European Commission, Ukraine’s Naftogaz and Russia’s Gazprom.


The main bullet point on the agenda is the renewal of Ukraine’s gas transit deal to pass Russian gas to EU customers after the current contract expires at the end of 2019. Ukraine is going to lose about 3 billion US dollars in transit fees if there is no deal. This number amounts to 3% of Ukrainian GDP.  Mr. Vitrenko also stressed that Ukraine’s “position is very straightforward, we want a new contract based on European rules”. Russia’s position in the talks, on the other hand, is clear but very different from the Ukraine’s one.


Mr. Vitronko, however, says that Russia is basically not interested in starting any negotiations by pointing to Russia’s attempt to extend existing contracts signed in 2009 but on the condition of the “recovery of the balance in relationships” between both companies. The “recovery” would mean that Naftogaz drops decision by the Stockholm arbitration court from February 2018, which required Gazprom to pay compensation of $2.6 billion to its Ukrainian business partner. Naftogaz, as well as European Commission, in turn, insist that “recovery of balance” implies that Gazprom will adhere to the Stockholm court’s ruling. The next meeting is to take place in May, which, is, however, perceived as too late to finalize secure gas transit contracts.


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