Aug 18, 2022
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SVO forces Gazprom to break the transit contract with Ukraine

Ukraine can keep the transit of blue fuel after 2024 if its gas transportation system is in working order, and in Europe the demand for Gazprom’s products continues. This was stated by the director of the Department of Economic Development of the Russian Foreign Ministry Dmitry Birichevsky. The same conditions were previously voiced in the Kremlin. But it is possible that the pumping of Russian gas through Ukraine will stop even before the expiration of the current transit contract – its implementation is greatly complicated by a special military operation (SVO).

“From the very beginning of the special military operation in Ukraine, we, as experts, had the impression that both conflicting parties were very sensitive to the gas transportation infrastructure focused on the transit of Russian gas to Europe, since for Ukraine this is real money for the transit of Russian gas in accordance with the contract. For Russia, this is also real money that the Russian Federation received from European gas buyers for the volumes supplied to these European countries, ”explains Aleksey Gromov, Energy Director at the Institute of Energy and Finance.

The “quivering” attitude of Moscow and Kyiv to the transit of Russian gas is noted not only by experts. It would seem that on February 24 everything turned upside down in Ukraine, and only the country’s gas transportation system continued to operate as before. After the start of the NWO, Gazprom did not refuse to fulfill its contractual obligations, Naftogaz also did not see any problems in continuing transit. They interact daily at the corporate level.

During the Russian special operation, the Ukrainian GTS has never failed. Bombs, shells and fragments of aircraft missiles bypass it.

Apparently, the soldiers of both armies, on instructions from “above”, are trying to protect the gas transportation infrastructure of Ukraine.

For an outside observer, this can cause (and often causes) bewilderment. How can Russia carry out the NVO and at the same time transfer money to Naftogaz, the largest taxpayer, to the budget of Ukraine, from which the Armed Forces of Ukraine are fed? It turns out that Russia itself is sponsoring its opponent?

Kyiv is no better off, helping to transport Gazprom’s products to Europe, while the company’s profits are also partly used to maintain and modernize the Russian army.

This example clearly demonstrates what an armed conflict between neighboring countries is like in the era of globalization. In terms of scale, the battles in the south-east of Ukraine are quite comparable to the battles of the Great Patriotic War: hundreds of thousands of soldiers are involved in them, the front line stretches for a thousand kilometers. But even under these conditions, the parties are not ready to give up their joint profitable business in an instant.

On the other hand, the NWO is still making significant adjustments to the implementation of the transit agreement, which Kyiv and Moscow are trying to comply with.

The first stumbling block appeared two months ago, when Ukraine refused to accept fuel at the Sohranivka gas measuring station (GIS). The reason for this was “force majeure”: Kyiv lost control over the territory where the Novopskov compressor station is located. The “GTS Operator of Ukraine” (OGTSU) declares its inability to guarantee the stable operation of this and other facilities. In addition, on May 9, the Ukrainian operator recorded an unauthorized withdrawal of transit gas, which was allegedly transferred to pipelines on the territory of the DPR and LPR.

But the leadership of the OGTSU ignores one important fact: the GIS “Sokhranovka” and the CS “Novopskov” came under the control of the allied forces back in March. Then why did the “force majeure” occur with a delay of two months?

“Gazprom” has not received any confirmation of the circumstances of force majeure, does not see any obstacles for continuing work in the previous mode, Ukrainian specialists have been quietly working all this time on the Sohranivka GIS and the Novopskov CS and continue to do so, transit through “Sokhranivka” is provided in full, there were no complaints from counterparties, and there are none,” said Sergey Kupriyanov, a representative of the Russian company.

From his words, it becomes clear that Ukraine de facto continues to control the point of entry of Russian gas on the territory of the LPR – Sokhranivka is serviced by employees of the OGTSU.

Similar schemes were already used in the Donbass until 2017, when the entire city-forming enterprises of the Metinvest group of companies in the territories not controlled by Kyiv continued to work in the Ukrainian legal field and pay taxes to the Ukrainian budget.

The management of the OGTSU claims that Russia can transfer the falling volumes of transit gas to the second entry point – the Sudzha GIS. Its throughput capacity allows pumping up to 244 million cubic meters daily (more than two times more than Gazprom contracted). Gazprom claims that it is impossible purely technologically to load Sudzha up to 109.59 million cubic meters per day. In addition, the distribution of volumes between the two entry points is clearly spelled out in the transit contract.

In fact, Ukraine violates its obligations. But her special position, if desired, can be understood: the transit contract does not spell out what to do if Sokhranivka ends up on the territory of the LPR.

Additional sharpness to this dispute is given by the fact that the principle of “pump or pay” is spelled out in the current agreement. That is, Gazprom is obliged to pay for transit services in the amount of 109.59 million cubic meters daily. Since May 11, the Ukrainian GTS has pumped about 50 million cubic meters to Europe, and today even less (slightly more than 40 million cubic meters). This means that the Russian company pays for non-existent transit.

One can turn to the Stockholm Arbitration for a solution to another gas dispute, but Moscow cannot count on its impartiality. There is another option – to terminate the agreement with Naftogaz ahead of schedule, nullifying Ukrainian transit.

For Europe, this will be, to put it mildly, an unpleasant surprise. It will not be able to promptly replace the missing volumes of gas.

Nord Stream 2 did not work, the Yamal-Europe gas pipeline was blocked by decision of the Russian government. Only the Turkish Stream and the first line of the Nord Stream remain, on which repair work is currently underway.

Ukraine, meanwhile, will lose transit revenues and will be forced to look for alternative sources of gas imports for its own needs. And the problems of Ukraine today automatically become the problems of its Western patrons. Zelensky, like Sharikov from Bulgakov’s immortal story, needs to “eat” somewhere.

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