Russian sanctions bill could spur gas transit independence

Written by on August 12, 2014 in Business - Comments Off on Russian sanctions bill could spur gas transit independence

When European Union member states, Turkey and Moldova buy natural gas from Russia, they contract with the Russia party at Ukraine’s western border, thereby obviating the need for a Ukrainian counterparty. But soon, Western gas consumers might have to deal with the Ukrainian side.

Changes to the rules of gas transit might enter through the backdoor should Ukraine’s parliament pass a law on sanctions against Russia on August 12, which would oblige European buyers to deal with Ukrainian companies instead of Russia’s Gazprom.

Russia’s state-owned gas behemoth has a separate agreement with the Ukrainian gas transit company, the state-owned Ukrtransgaz. Kyiv receives around $3 per 1000 cubic meters per 100km, depending on a formula that is based on the price of gas itself.

In 2013, Ukraine transited 86 billion cubic meters of gas to Europe for almost $3 billion, according to Gazprom. Europe receives a third of its gas from Russia, half of which passed through Ukraine.

The measure is part of the proposed law on sanctions to be imposed on 72 individuals and 65 legal entities – mostly Russian – for supporting and financing terrorism in Ukraine. It forbids Russian gas transit services via Ukraine, according to an August 11 statement by state gas giant Naftogaz Ukrainy. To compensate, the company is proposing that all European and Turkish counter-parties dealing with the Russian gas company Gazprom, which would be sanctioned, to sign transit deals with Ukrtransgaz in order to maintain a constant flow.

To read the full story, visit The Kyiv Post.

(Photo: jarpur/sxc.hu)

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