Naftogaz, Ukraine’s state-owned oil and gas company, said in a statement late on Dec. 27 that it had received $2.918 billion from the Russian state-owned energy giant Gazprom amid ongoing talks on gas transit.
Gazprom was obliged to pay Naftogaz the amount due to a February 2018 ruling in Stockholm arbitration proceedings.
Ukraine said that Russia and Gazprom had violated gas delivery agreements with Ukraine. Russia has only agreed to the payment recently as both parties are in the final stages of talks over a new five-year agreement on Russian gas transit through Ukrainian pipelines.
Gazprom’s payment includes $2.56 billion indicated by the Stockholm arbitration verdict as well as interest that accumulated since 2018.
Naftogaz and Gazprom have also agreed to drop other lawsuits they have against each other. This includes a $12 billion claim that Naftogaz filed in Stockholm earlier this year. With that claim dropped, some critics have argued that the deal is so far better for Russia than it is for Ukraine.
But the payment was welcomed, with President Volodymyr Zelensky calling the transfer of almost $3 billion to Naftogaz “another victory” for Ukraine.
“This money is already in the Ukrainian accounts,” he said on Dec. 27 on Twitter.
While a tentative deal on transit has been agreed to, parties are yet to finalize a gas transit deal which is expected to be signed by Dec. 31 before the existing contract is expired.
On Dec. 20, representatives of Ukraine and Russia with the mediation of the European Commission agreed that a new gas transit deal will be signed for five years and could be prolonged for another five years. Russia will transfer at least 65 billion cubic meters of gas through Ukraine in the first year and at least 40 billion cubic meters in the next four years.
Russia, which is now building Nord Stream 2, a gas pipeline to Germany bypassing Ukraine, wanted to sign a transit contract with Ukraine for one year only. Ukraine insisted on a 10-year contract instead.
Yuriy Vitrenko, executive director of Naftogaz, called the new agreement with Gazprom a “compromise, which is difficult for both sides.”
Despite the ongoing Russian war against Ukraine in which some 14,000 people have been killed since 2014, the country has remained a vital transit hub for Russian natural gas headed to the EU. Kyiv earns about $3 billion per year in transit fees, approximately 3% of the country’s annual gross domestic product.
But Nord Stream 2, a new Russian pipeline under the Baltic Sea to Germany that is roughly 90% complete despite U.S. efforts to sanction its construction, is a major headache for Ukraine. It could deprive the country of the current transit fees.
For its part, Germany had insisted that Russia maintain some of its natural gas transit through Ukraine. Otherwise, Berlin will not allow Nord Stream 2 to become operational. Moscow also needs Ukrainian gas transit until Nord Stream 2 is fully up and running.
Read also: Russia to pay Ukraine $3 billion for new gas transit deal
