KIEV: Moscow and Kiev on Monday signed a five-year agreement on the transit of Russian gas to Europe via Ukraine, after months of difficult talks but just ahead of a looming New Year deadline.
The current gas transit deal between the two ex-Soviet countries expires Tuesday and ties between them have been shredded since Moscow annexed Crimea in 2014 and supported a separatist insurgency in eastern Ukraine.
Some 18% of the European Union’s annual natural gas consumption comes from Russia via Ukraine, putting additional pressure on EU officials who helped to broker the deal.
“Ukraine has signed a five-year transit contract,” Ukrainian President Volodymyr Zelensky announced on his Facebook page, nearly two weeks after a provisional deal was agreed.
“A whole complex of documents has been signed”, allowing “the transit of gas after Dec 31”, Alexei Miller, the boss of the Russian gas giant Gazprom told Russian media.
It is expected that Gazprom will transit at least 65 billion cubic metres of natural gas via Ukraine next year, then at least 40 billion per year from 2021 to 2024, said Zelensky, earning Kiev “more than seven billion dollars”.
Last year Russian gas giant Gazprom supplied Europe with 200.8 billion cubic metres of natural gas, with about 40% going through Ukraine, earning the country around US$3 billion a year in transit fees.
Russian President Vladimir Putin said earlier this month that Moscow wanted to keep some gas flowing through Ukraine, despite having built several pipelines to Europe since the current deal was agreed a decade ago.
It comes days after Russian energy giant Gazprom paid US$2.9 billion to Ukraine’s Naftogaz to settle a long-running dispute over transit fees, in what had been a major stumbling block to agreeing the new deal.
Russia’s gas pipelines include the Nord Stream 2 project due to be completed by the end of next year, which seeks to double gas volumes to Germany.
The United States has long opposed the €9.5 billion (US$10.6 billion) project and the US Senate voted last week to slap sanctions on companies working on it.
Washington insists the pipeline would give Russia too much influence over security and economic issues in western Europe.
Transit problems for Russian gas began after the fall of the Soviet Union when an independent Ukraine won control of the pipeline infrastructure.
Several supply crises followed, with Russia using gas as a weapon against Ukraine and cutting supplies repeatedly in 1992, 1993 and 1994.
The current contract between Russia and Ukraine was signed following the last gas crisis which ended up disrupting European supplies in 2010.