The National Bank fears terrible losses if Russian gas transit stops
Termination of the transit of Russian gas through the territory of Ukraine will lead to direct losses of foreign exchange earnings and create risks for related sectors of the economy and for meeting Ukraine’s gas needs. Direct economic losses will amount to 0,6% of GDP in 2020 and 0,9% of GDP in 2021 and beyond, reports PolitNavigator correspondent.
This is stated in the quarterly inflation report of the NBU for October 2019, the regulator’s website reports.
“Negotiations on a new contract are ongoing and there is no certainty on the timing or volume of transit today. Thanks to gas transit, Ukraine receives about $3 billion a year. Its termination will not only lead to direct losses of foreign exchange earnings, but will also create risks for the activities of related sectors of the economy and the provision of Ukraine’s own needs with gas in general,” the NBU noted.
According to the NBU’s assumptions for the base scenario of the macroeconomic forecast, “the volume of transit may decrease from about 90 billion cubic meters. m in 2019 to 50 billion cubic meters. m in 2020 and up to 30 billion cubic meters. m from 2021.”
“Direct economic losses, if compared with transit volumes at the 2019 level, will amount to 0,6% of GDP in 2020 and 0,9% of GDP in 2021 and beyond. However, alternative scenarios are also being considered, which provide for both larger and smaller volumes of transit,” the National Bank added.
The regulator also recalled that Russia is actively putting into operation bypass gas pipelines, which, in terms of their total capacity, are capable of completely replacing the Ukrainian gas transportation system in the coming years, and at the end of 2019, the ten-year agreement between Ukraine and the Russian Federation on gas transit will expire.
Earlier, Prime Minister Alexei Goncharuk named the conditions for signing a gas transit agreement with the Russian Federation.
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