July 17, 2018 / 2:55 PM / 8 months ago

Russia and Ukraine to hold further gas transit talks

BERLIN (Reuters) - Ukraine and Russia said they will hold further European Union-mediated talks on supplying Europe with Russian gas, in a key first step toward renewing Ukraine’s gas transit contract that expires at the end of next year.

FILE PHOTO: German Economic Affairs and Energy Federal Minister Peter Altmaier addresses the media in Berlin, Germany, July 17, 2018. REUTERS/Fabrizio Bensch

European Commission Vice-President Maros Sefcovic, who chaired a three-way meeting in Berlin with Ukraine’s Foreign Minister Pavlo Klimkin and Russian Energy Minister Alexander Novak, said he hoped talks will continue with separate political and expert rounds every six to eight weeks.

The talks have been complicated by a lengthy legal dispute between Russian and Ukraine’s energy companies, resulting in court rulings in February that both must compensate each other. Naftogaz emerged the net winner, however, gaining $2.56 billion from Gazprom.

With Russia embroiled in conflict with Kiev over breakaway regions in Ukraine’s east and the European Union reliant on Russian gas to fuel its industries, the future of gas transit - seen by Kiev as a crucial guarantor of its independence from Moscow - is the object of intricate diplomacy.

Ukraine has been a key route for carrying Russian gas to Europe where it supplies around a third of gas needs, but Moscow and Kiev have clashed frequently over energy, leading to growing concern about renewing the transit agreement.

“The clock is ticking, and if we look at the calendar we see the end of 2019 is just round the corner,” Sefcovic told a news conference after the meeting, also attended by the heads of Russian gas giant Gazprom and Ukraine’s Naftogaz.

German Economy Minister Peter Altmaier, who had invited the parties to Berlin, said he was optimistic that the two sides would eventually agree on a way of continuing gas transit.

Ukraine, a sovereign state that was once ruled from Moscow as part of the Soviet Union, believes its role in transmitting Russian gas gives it leverage to help guarantee its security in the face of Russia’s annexation of the Crimean peninsula and backing for separatists in the East.

But the talks did not yield agreement on the volumes that Russia might transmit in future.

Sefcovic said he wanted to see “substantial volumes which would guarantee commercially viable transit” from 2020 onwards.

Last year, the transit amounted to more than 93 bcm, while Gazprom’s total exports to Europe and Turkey reached an all-time high of 194 bcm. Gazprom plans to raise gas exports to Europe to a new record of 200 bcm.

Ukraine’s transit role is also imperiled by the planned Nord Stream 2 pipeline which would directly link Russia with Germany via the Baltic Sea, bypassing Ukraine. But Altmaier said rising gas demand meant Ukrainian transit would be needed regardless.

Speaking at a separate Berlin news conference after the meeting, Novak was bullish on growing European demand.

“We see that consumption in Europe is growing, it was around 6 percent in the first half of the year,” he said. “In the next 5 - 10 years the supply volumes to the European consumers will be higher than in 2017 and 2018. We can talk about additional growth of 10-15 percent.”


Russian gas giant Gazprom and Ukraine’s oil and gas firm Naftogaz have been involved in a lengthy legal battle over transit and supply deals. A Stockholm court found in Naftogaz’s favor in the final stage in February.

Gazprom is challenging the ruling in the same court, while Novak said on Tuesday the possibility of an amicable solution has been “touched upon”, which irked Ukraine.

“The Russian attempt to agree on an out-of-court settlement of the cases, on which the Stockholm tribunal had already made a ruling, shall not pass,” Klimkin said in his twitter feed.

Reporting by Thomas Escritt in Berlin and Vladimir Soldatkin, Oksana Kobzeva in Moscow and Natalia Zinets in Kiev; editing by Emelia Sithole-Matarise

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