March 28, 2024

The Normandy Format talks has ended, as expected, with no clear-cut result. Among other issues, gas topic was discussed, which is more relevant than ever for ordinary Europeans during this winter period. Especially, taking into account that on January 1, 2020, the current contract between Russia and Ukraine for the transit of gas to Europe through Ukraine expires.

Putin tried to turn everything into a joke, and even, as our analysts interpreted, to demonstrate some kind of blackmail, but this did not lead to a constructive deal. And here, a statement made by the company-operator of the Nord Stream-2 gas pipeline about the delay in completing the construction of the gas pipeline and that the company would not be able to meet the deadlines announced earlier played a dirty trick on the Russian president. Representatives of the company said: “We’ve planned that in the coming months we will complete the project in accordance with all legal and technical standards”. But the exact date was not named. How much time will it take? – 1, 2, 3 months, half a year ?! Nobody knows, neither EU nor Putin.

But it is already obvious that Nord Stream-2 will not become an alternative to transit through Ukraine in the near future. So, whether it will ever be is a doubtful question! If now the untimely setting into operation, failure to meet the deadlines for both the launch and the normal operation is an obvious fact.

Putin has no choice but to say yes to sign a new contract with Ukraine. At the same time, the Russians, in their usual manner, are putting pressure on the Ukrainian side, exposing conditions that do not correspond to the current state of affairs – Ukraine’s refusal of claims against Gazprom upon the decision of arbitration in Stockholm, as well as of the fine imposed on Gazprom by the Antimonopoly Committee of Ukraine, the gas transit contract shall be for 1 year.

Meanwhile, according to a research conducted by Institute of Energy Economics at the University of Cologne (EWI) (https://www.ewi.uni-koeln.de/cms/wp-content/uploads/2019/12/Trilateral_Gas_talks_final.pdf), it is that Russia now needs these contracts. In case of interruption of the Russian gas transit through Ukraine’s gas transportation system as from January 1, 2020, Russia’s losses may reach 3.4 billion euros for the first quarter of 2020. While Ukraine will lose about 500 million Euros, that is, almost seven times less in the case of the so-called “zero” transit. This is primarily due to the fact that the Kremlin will not be able to fully receive its export earnings from gas exports.

In case of failure to conclude a new agreement on gas transit, EU nationals may see negative economic consequences on their wallets. If there is no transit of the Russian gas through Ukraine, gas prices in Europe may increase significantly, due to which the economies of the EU countries may loss about 1.5 billion Euros, provided the warm weather conditions, but if the winter is cold, this amount may increase to 2.1 billion euros. Here it is worth asking a question: why, having the opportunity to buy cheaper liquefied gas from the USA, we are still in the economic bondage of the Kremlin? We are not trying to get rid of it, but are plunging into it due to the Nord Stream-2?

We should not forget that in addition to direct economic losses, such a situation can also cause reputational risks and losses for Russia, which once again will confirm the reputation of an unreliable partner! Perhaps this will push decision-makers to redirect their attention to other, more reliable, energy suppliers?

By the way, the gas is a long-standing favorite topic of the Russian leader. Experts have estimated that at approximately ¾ of his meetings with foreign leaders over the past 15 years, cooperation on gas issues was somehow discussed. At the same time, experts note that every year Gazprom’s projects are becoming more expensive, but gas prices have not risen in the face of an increasingly obvious overproduction and market globalization. But Russia has nothing to offer except for gas (and sometimes weapons). So they use what they can.

In any case Ukraine now has many game changers. The closer December 31, the more valuable they become.

We may only hope for a warm winter and crossing our fingers celebrate Christmas at still going warm houses.

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