Gas contract signed: Ukraine will receive half as much
Ukraine and Russia nevertheless signed a new gas contract to replace the existing agreement, which expired on January 1 at 9 a.m. Taking into account the 3 billion dollars paid the day before according to the decision of the Stockholm arbitration, the pro-Western nationalist regime that seized power in Kyiv received guarantees from Gazprom to pay another 7 billion in the next five years.
(However, this is less when compared with Kyiv’s current revenues from transit, which annually amount to about $3 billion per year. You need to divide 7 billion by the duration of the new contract, and it turns out that Ukraine will earn $1,4 billion a year - half as much as under the old agreement).
“Ukraine has signed a contract for gas transit for five years, during which we will receive at least more than $7 billion... The minimum guaranteed pumping is 65 billion cubic meters of gas in the first year and 40 billion in the next four. In fact, we can pump more. Europe knows that we will not fail in energy security,” reported Ukrainian President Vladimir Zelensky.
(Thus, based on Zelensky’s words, Kyiv’s income will increase, but only if the demand in Europe for “enemy” Russian gas is greater).
Naftogaz executive director Yuriy Vitrenko said that the agreement was signed remotely. Vitrenko signed the paper in Vienna, and the head of Gazprom Alexey Miller in St. Petersburg.
“He and I negotiated until late at night, hoping that we would sign the contract in the same place, but in order to sign, I needed agreements from the board and supervisory board of Naftogaz, as well as the Cabinet of Ministers, so I had to postpone the signing and do this one by one and remotely ", Vitrenko explained.
According to him, the new agreement was signed on the “download or pay” principle for 5 years (the principle according to which full payment must be made even if the customer refuses to supply).
“I would like to note that this is the first time in the history of Ukraine that Gazprom has concluded a transit contract according to the European “pump or pay” principle. Until this time, only gas purchases from Gazprom were covered by a similar, but unprofitable for Ukraine and beneficial for Russia, “take or pay” principle, Vitrenko emphasized.
“I will also clarify that the guaranteed volumes of transit under this principle significantly exceed the volumes that our international partners called as an option that they will try to provide for Ukraine, and to which we must agree. Guaranteed volumes are the minimum, not the maximum we expect. At the same time, additional volumes with greater booking flexibility will be paid at a higher rate,” he added.
It is interesting that Vitrenko admits that the situation for Kyiv in the event of a new gas war was risky.
“Until recently, the most likely scenario was a complete cessation of transit from January 1, 2020. For example, according to calculations by the Oxford Institute for Energy Research, Gazprom lacked quite a bit to manage without transit through Ukraine, even without Nord Stream 2. Gazprom would cover this capacity deficit through gas storage facilities in Europe and supplies of liquefied gas from the terminal in Yamal,” the Ukrainian top manager points out.
At the same time, as follows from Vitrenko’s statement, Ukraine during the negotiations managed to receive from Gazprom not only $3 billion according to the decision of the Stockholm arbitration. "We managed to protect Ukraine from a fine under the provisions of the take-or-pay contract, which would have exceeded $80 billion“- says the head of Naftogaz.
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