Tuesday, December 17, 2019

"Ukraine’s Russian gas transit to the EU may end in 2020, depends on Nordstream-2"

Astute reader will recognize the biases of the writer and publication.
That said, they raise some interesting points about the economic and financial impacts of the suspension of the transit fees.
From Euromaidan Press:
December is the last month of Ukraine’s contract with Russia on the transit of Russian gas to the EU. It is rumored that Ukraine may restore direct gas imports from Russia and that the government plans to dismiss Andriy Koboliev, CEO of Ukrainian state-owned energy giant Naftogaz, who has done much to enhance Ukraine’s energy independence from Russia in the last years.
 However, a recent interview with Andriy Koboliev and his official statements suggest Ukraine isn’t capitulating to Russia in the energy field just yet. At the same time, hard talks and the expected launch of the pipeline Nord Stream 2, connecting Russia directly to Germany while bypassing the Ukrainian gas transport system, require all skills and efforts of Ukrainian diplomacy to secure Ukrainian positions and finally sign a new favorable transit contract.

Will it happen, or Ukraine should prepare for the end of transit and the loss of money? There are at least three issues discussed at different talks separately that should be examined separately as well: functioning of Naftogaz as a state company, the gas transit contract, and contract on the import of gas to Ukraine.
 
What is Naftogaz and why it doesn’t manage gas transit anymore
Prior to 2014, the Ukrainian state energy company Naftogaz was one of the most corrupt and unprofitable state companies that consumed large amounts of state subsidies. However, starting from 2014 when Koboliev became the CEO of the company, it has not only become profitable but also one of the largest taxpayers in the country.

In 2015, Naftogaz ceased buying natural gas directly from Russia. Instead, it imports gas from the EU, although some of the imported gas has Russian origin. Nonetheless, 2009 contracts were very unfavorable for Naftogaz. Under Koboliev’s management, Naftogaz won the International arbitration in Stockholm. As a result, Russia’s Gazprom has to pay $5.1 billion to Ukraine’s Naftogaz.
Only $2.1 billion has already been paid. Subsequently, some Gazprom assets were now arrested in the EU and now can be sold to cover the debt.

Additionally, Naftogaz operated as a gas transit agent in Ukraine, which brought $3 billion annual revenues.

Naftogaz CEO Andriy Koboliev says in the interview that even if transit across Ukraine will be stop in 2020, it wouldn’t affect Naftogaz negatively. Everything should be assessed in a broader context.
One should take into account that the transit system will be separated from Naftogaz into an independent company by the end of this year anyway. The EU required it for the new contract. Therefore, Koboliev says no matter if gas transit through Ukraine continues in 2020 or not, Naftogaz will no longer receive the $3 billion transit fees.

This will have a positive impact on Naftogaz. That $3 billion was a huge amount of money concentrated in one state company, which allowed national and regional gas operators to make profits on the gas price, saying: “Look, you have a lot of money anyway, we will pay you later for the consumed gas.” If it was a state decision, Naftogaz had to accept it, being a state company. However, from the market logic, this was counterproductive, Koboliev says....
....MORE

Previously: Natural Gas: "Polish PM: Nord Stream II Would Make Russia Free to act Against Ukraine, So Must Not be Built"
Someone should check in with Victoria "Fuck the EU" Nuland to see what the plan to follow-up on the 2014 regime change in Ukraine was.
Because, despite the fact their first concern is their own energy security, the Poles do have a point regarding their frenemy Ukraine, things could get a bit chaotic for Kyiv if Nord Stream 2 is completed as planned.

Maybe the Ukraine follow-up plan is mixed in the same stack as the follow-up for the "We came, we saw, he died" Libya plan.

Here are three stories on some aspects of the current state of play in Eastern European energy geopolitics....
Russia, the West, and Recent Geoeconomics in Europe’s Gas Wars
"Europe’s Energy Geopolitics is Getting Dicey"
The Nord Stream 2 Natural Gas Pipeline Is A Game Changer For Gazprom
"First American LNG Shipment for Ukraine Arrives at Polish Port"

See also:
"Berlin, Moscow Negotiate New Trade Accord".
-Reading Eagle
Feb. 12, 1940

Plus maybe a hundred posts on Gazprom and a thousand on natural gas. Use the 'Search Blog' box if interested.   
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