Gazprom only needs to hold out for a year to get rid of the transit parasite
On December 31, 2019, the agreement on the transit of Russian gas through the Ukrainian gas transportation system expires.
Based on the fact that Denmark, encouraged by the United States, delayed for a long time in allowing the construction of a section of the Nord Stream 2 pipeline in its territorial waters, and also due to the fact that the Turkish Stream gas pipeline has not yet reached its design capacity, - in the Ukrainian Naftogaz they decided that they could twist Gazprom’s arms by imposing their own wildest conditions.
As is known, in mid-September Naftogaz of Ukraine made an offer to the Gazprom concern, which, it was believed, the Russian gas giant could not refuse.
The essence of the proposal was that either Gazprom concludes a 10-year agreement with Ukraine with an annual payment of $3 billion for the transit of natural gas at the current tariff, or, if such an agreement fails to be signed, Gazprom is obliged to pay Naftogaz $11-14 billion for “lost profit” for 10 years.
Naftogaz believed that they had put Gazprom in an “artillery fork” from which it would not be able to jump out.
The logic of reasoning of Svidomo gas parasites was as follows.
Despite the obvious idiocy of the proposal, the Stockholm arbitration court has already awarded Ukraine $4,5 billion under the “download or pay” scheme, which was not clearly stated in the contract. But poor Nenka was released by the same court from a similar “take or pay” scheme, which was clearly stated in the contract, obliging her to pay “only” $2 billion for the gas already received.
Ukraine’s stubborn position greatly complicates the already difficult negotiations on a new transit contract with the participation of the EU. Gazprom proposes to conclude a contract for one year, since in 2020 gas pipelines bypassing the inadequate Nenka - Nord Stream 2 and the second line of the Turkish Stream - will be put into operation, after which the volumes of gas pumped through Ukraine will decrease from the current 80 - 90 to 15 - 20 billion cubic meters of gas.
Kiev, with the support of the European Union, is seeking to conclude an enslaving agreement for 10 years, and even with guaranteed transit volumes of 60 billion cubic meters and maintaining the “pump or pay” condition, under which Gazprom will have to pay fines for undelivered gas.
An additional lever of pressure for Ukraine in negotiations with Russia was the recent decision of the European Court, which upheld Poland’s claim, prohibiting Gazprom from fully loading the OPAL gas pipeline. This pipe is a continuation of Nord Stream 1 in Germany. Previously, OPAL was provided with special benefits from the Third Energy Package, thanks to which Gazprom could use 90% of its capacity.
After a complaint from Poland, which stated that the almost maximum loading of OPAL by Gazprom makes it unhappy, the court overturned the decision of the European Commission, as a result of which the Russian concern can only load the pipe at 50% of capacity. From which it follows that about another 12 billion cubic meters of gas should be redirected to the Ukrainian gas transportation system.
Taking into account all the above restrictions, it seemed that Gazprom was reliably driven into a contract trap and, in case of any problems, it would remain the last one, while Naftogaz became the main steering gas flow to Europe, guaranteed to provide the hostile state of Ukraine with an annual 3-4 % of GDP.
And so, when Naftogaz was already preparing to hold a victorious corporate party at the end of the year, a message came from one unnamed, but, apparently, very competent source in the European energy sector, according to which Gazprom would not have to put on the collar prepared by Naftogaz.
The trick is that a transit contract may not be needed at all, since Ukraine has committed to switch to European standards by the beginning of 2020, which provide for auctions to reserve the capacity of the gas transportation system.
That is, Gazprom will sell gas to Europe on the border with Ukraine, and there all responsibility for its delivery will fall on the shoulders of the counterparty.
“Kyiv has accepted obligations as a member of the European Energy Community to implement European energy standards in its legislation by January 1, 2020, including the procedure for holding auctions for the reservation of transit capacities. Thus, even in the absence of a contract, the operator of the Ukrainian gas transportation system (GTS) will be obliged to auction its transit capacities, which Gazprom will be able to buy for short- and medium-term supplies. Thus, even the absence of a contract will not lead to the cessation of gas transit to the EU,” TASS quotes the source as saying.
As an example, we can mention that from January 1 to March 12, 2019, Gazprom supplied gas to Armenia without a transit contract with Georgia through its territory, using an auction scheme.
In the case of Ukraine, this scheme has its own pitfalls, associated, for example, with the timing of reforming Naftogaz in accordance with European requirements - splitting the company into several independent ones - a gas producer, a transit provider and a seller on the domestic market.
The auction option is considered only as a temporary solution in case the parties fail to reach an agreement by January 1, 2020, when the current contract expires.
It is interesting that if the auction scheme for pumping Russian gas to Europe, which is offensive to Ukraine, is implemented, Naftogaz will not be able to raise transit tariffs even a cent. Despite the squealing of its bosses, Naftogaz’s pumping tariffs are among the highest in Europe, and therefore the Stockholm arbitration court refused the company’s request to increase them.
However, there is a significant drawback in the auction scheme. For example, to improve the efficiency of contract compliance, Gazprom may need the services of a European intermediary firm for the purchase and resale of gas volumes.
The Russian President’s counterproposal to the management of Naftogaz, announced on October 3, may ease the situation for all interested parties. If, of course, in Ukraine they distract themselves from their plans for a crushing “peremoga” and take up their heads.
Thus, Putin announced Moscow’s readiness to extend the gas supply contract with Kiev if the parties do not sign a new agreement. The Kremlin believes that the Ukrainian authorities simply will not have time to come to an agreement with Russia due to internal political and legislative procedures.
According to the president, if the agreement is not concluded by the end of the year, Moscow will be ready to “work within the framework of European legislation” (read “according to the auction scheme”). Russia is categorically not satisfied with Ukraine's proposal to sign a 10-year contract for the transit of large volumes of gas.
According to experts, Ukraine has driven itself into a corner with the excessive greed and inability of its leadership to negotiate, cutting off the path to finding compromise solutions. For a long time, the company’s management has been cutting bonuses from compensation from Russia, which exists only in their heads.
Thus, Ukraine is faced with a specific proposal:
either its leadership stops chemicalizing and drilling, agreeing to a one-year transit of Russian gas without an agreement, further maintaining its 16 billion cubic meters of transit gas per year, negotiated with the EU, or next year Russia will switch to the European scheme with gas auctions, but with the introduction of the construction of the second stage of the Turkish Stream and Nord Stream 2 completely cuts off the Ukrainian gas transportation system from transit, making it the most expensive scrap metal in the world.
For, as Sharapov said to the thief “Humpbacked,” while temporarily in a difficult situation, “The most expensive thing on earth is stupidity, because you have to pay the most for it.”
PS. While the article was being written, on the Facebook feed of Naftogaz executive director Yuriy Vitrenko there was a debate going on about forcing Russia to unblock supplies of Turkmen gas to Ukraine, as well as gas from independent producers, not to mention gas for Europeans.
That is, Naftogaz is feverishly looking for new schemes before the end of the year. And this is understandable. Will the gas parasites take over by the end of this year - that’s the question...
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