Russia-Ukraine Gas Talks Resume as EU Seeks to Avert Supply Cut

9/19/19
Russia and Ukraine are set to restart natural gas talks later on Thursday, with the European Union seeking to avoid disruptions in imports this winter from its biggest supplier. In the past five years, mediation by the commission has helped avert disruptions in Russian gas supply to Europe via pipelines across Ukraine, the current deal on which ends this year. European traders are closely watching the trilateral talks as a potential delay in a deal or disruption in flows may affect prices during the peak winter demand season, with few signals that any party expects an immediate agreement. “One shouldn’t expect any concrete agreements at this meeting,” Dmitry Peskov, spokesman for President Vladimir Putin, told reporters Wednesday. “Of course, a lot of detailed work needs to be done.” Long-standing gas-price and debt disputes between Russia and Ukraine disrupted deliveries to Europe during freezing weather in 2006 and 2009. More than a third of Europe’s gas comes from Russia, and most of that goes through Ukraine’s Soviet-era pipelines.

Ukraine has been increasing volumes in its storage facilities, preparing for a scenario in which Russia stops gas transit at the end of the year. On Tuesday, Naftogaz announced it signed an agreement with a “big international trader” to buy 450 million cubic meters of gas in the first quarter of 2020. The company said it already contracted needed supply volumes and is considering “several other offers from European traders” on supply next year. While a recent exchange of prisoners between Russia and Ukraine signaled a bid to ease five years of conflict between the two nations, legal tensions between the EU and Russia over gas supplies have not subsided. A ruling by an EU court earlier this month limited Gazprom’s usage of the Opal pipeline in Germany, which carries fuel from the Russian supplier’s Nord Stream link under the Baltic Sea, circumventing Ukraine. Opal is a part of Russia’s only direct gas export route to Europe. The verdict will be a factor in the trilateral talks with Ukraine and the EU, Novak said last week. Potentially, the court decision leaves Russia in a weaker negotiating position with Ukraine over the extension of their gas-transit deal, according to BloombergNEF analyst Anna Borisova.

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