Russia will pay to reach an agreement with Ukraine to resolve the deadlock in talks over a new gas transit deal, Reuters reported on Dec. 20, citing a source close to ongoing talks.
Russia reportedly had offered to pay Ukraine “about $3 billion” in order to move ahead with a new deal on the supply of Russian gas to Ukraine and the transit of gas through Kyiv’s territory to the European Union. Andriy Yermak, an aide to Ukrainian President Volodymyr Zelensky, confirmed this to Ukrainian media outlet Hromadske on late Dec. 20.
“We are returning home with very good news and will have a transit contract on favorable terms for Ukraine,” Yermak said, adding that more details will be revealed on Dec. 21.
Thanks to these agreements, Ukraine may receive $3 billion according to the decision of the Stockholm Arbitration.
The Russian Energy Ministry and state-owned energy giant Gazprom did not reply to Reuters’ requests for comment. Ukraine’s Energy Ministry and state-owned Naftogaz also declined to comment.
An existing gas transit deal between Ukraine and Russia is set to expire at midnight on Dec. 31 and both countries have scrambled to reach a new pact. Talks are still underway in the Belarusian capital of Minsk.
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.
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, will bypass Ukraine. It could deprive the country of the current transit fees.
For its part, Germany has insisted that Russia maintain some of its natural gas transit through Ukraine. Otherwise, Berlin will not allow Nord Stream 2 to become operational. This appears to be the main reason why Russia has engaged in talks with Ukraine, but Moscow is also aware that it needs Ukrainian gas transit until Nord Stream 2 is fully up and running.
A partially unresolved lawsuit between Naftogaz and Gazprom had blocked the signing of a new gas transit contract until now. That lawsuit, litigated in Stockholm, relates to an allegation that Russia and Gazprom had violated gas delivery agreements with Ukraine.
The Stockholm court ruled in Ukraine’s favor last year and, since November, Ukraine has sought to recover $2.6 billion from Gazprom that was awarded to Naftogaz in the ruling.
Ukraine, Russia and the EU have reached a preliminary, trilateral agreement on transit, according to European Commission Vice President Maros Sefcovic.
On Dec. 19, Sefcovic gave a positive assessment of the Minsk talks so far.
“Today we really did a very good job, prepared a draft protocol, a detailed protocol that has high readiness, which currently needs to be agreed upon and I hope that we will come to final agreements in the near future,” he wrote on Twitter.
Talks between Russia and Ukraine are expected to continue in Minsk throughout Dec. 20 and possibly beyond, multiple Ukrainian-language media outlets have reported.
If a transit deal in Minsk is not reached, it could be worse for Russia than Ukraine. Kyiv has spent almost six years working on its energy independence and security. Previously, it imported billions of cubic meters of natural gas from its eastern neighbor annually.
“In some respects, moving out of Russia’s gas supply chain could be a big positive,” writes the London-based emerging markets analyst Timothy Ash. “This whole business has in the past bred a dependency on Russia and corruption culture amongst Ukraine’s elites…”
Read also: Timothy Ash: What to make of this Ukraine-Russia gas deal?
