A gas deal with Russia now looks more likely, said President Volodymyr Zelensky following his first face-to-face meeting with Russian President Vladimir Putin.
However, no deal has been reached. The two sides have yet to nail down an agreement that would see Russian gas continue flowing through Ukraine into Europe. The current contract is set to expire on Dec. 31, which will cost Ukraine $3 billion per year in transit fees.
Kyiv and Moscow have held gas negotiations in Brussels over the past several months, with the mediation of the European Union Energy Commissioner Maros Sefcovic.
“We have more chances to sign (a contract), with better conditions that had previously been discussed by our representatives,” Zelensky said on Dec. 10.
The two leaders met as part of the Normandy Format negotiations, which also include the leadership of France and Germany. The two sides agreed to exchange all prisoners before the end of the year, disengage weapons in three locations and implement the so-called Steinmeier Formula into Ukrainian legislation.
Zelensky and Putin also dedicated a lot of time to discussing gas during their one-on-one meeting, according to the Ukrainian president.
Zelensky said that he made progress in pushing for a multi-year deal. The Kyiv Post’s sources at the presidential administration say Zelensky wants a 10-year contract. Russia has been insisting on a short-term deal, as it closes on the completion of its Nord Stream 2 project.
The Nord Stream 2 pipeline, which is now 80% finished, would transmit Russian gas under the Baltic Sea into Germany, bypassing Ukraine, making the Ukrainian transit route obsolete. In October, Denmark dropped its challenge to building the pipeline through its territorial waters, which had been the major obstacle to the project’s completion.
U.S. lawmakers on Dec. 9 agreed to include sanctions against the companies involved in building the pipeline in the U.S.’ 2020 defense bill. A source in the Ukrainian presidential administration told the Kyiv Post that Zelensky had been promised these sanctions to strengthen his negotiating position.
“It’s difficult when one side insists on one year and we insist on 10 years. I think we will find something in the middle,” said Zelensky.
Despite the president’s optimism, Prime Minister Oleksiy Honcharuk wrote on Facebook that Ukraine is ready for a “gas war” with Russia.
“We are fully prepared for this: our reserves are full, our logic is supported by the EU and the Stockholm arbitration decisions, and Nord Stream 2 has not been completed,” Honcharuk wrote.
The Prime Minister added that Ukraine will not drop its demands for Russia’s state gas company Gazprom to repay its debts to Ukraine’s state company Naftogaz, but would accept repayment in the form of gas deliveries. Zelensky said that the debt issue has been unblocked following his discussion with Putin.
Gazprom owes Naftogaz a net $3 billion for violating earlier gas agreements, according to a 2017 ruling by the Stockholm arbitration court. Gazprom had appealed the decision but a Swedish court of appeals rejected the challenge last month.
Russia had previously insisted that Ukraine must drop its demands for repayment before a new gas transit deal could be signed.
At a news conference following the negotiations, Putin said that direct supplies of gas to Ukraine would also be possible if the two sides can reach an agreement. He added that this might result in a 25% reduction in gas costs for industrial consumers in Ukraine.
