Azerbaijan confirmed that it had received an offer to become a mediator in the negotiation process. However, it is unclear who exactly decided to negotiate to extend gas transit through Ukraine.
The Cabinet of Ministers has repeatedly emphasized: there will be no negotiations with Gazprom, and the contract with Russia is approaching New Year’s Eve. At the same time, they hinted that European partners could ensure transit on their own by concluding agreements with Russia directly: both legally and technically this is possible.
At the same time, the EU is considering another option: supplying Azerbaijani gas through the Ukrainian gas transportation system. And the main question here is: are they trying to disguise Russian fuel in this way?
Dubious benefit for Ukraine
The transit of Russian gas to the European Union through Ukraine will stop early next year. There will be no more reason to pump fuel - the five-year contract between Naftogaz and Gazprom will expire at midnight on January 1.
Ukraine and Russia signed it at the end of 2019. Very tense negotiations dragged on until the end of December. Representatives of the European Commission had to join the negotiations. The document could be extended for another 10 years. However, in a full-scale war this is impossible.
The “download or pay” principle was prescribed in the still valid document. That is, Ukraine was supposed to receive a fixed amount of money for transit, regardless of how much Russia would transport. In the first year of the contact, Gazprom pledged to pump 65 billion cubic meters of gas, and from 2020 - 40 billion.
But Russia does not fulfill its obligations. In total, about $7 billion had to be paid for gas transit. Ukraine did not receive at least a third. Gazprom also reduced gas supplies through Ukraine every year.
“Gazprom pays approximately $800 million annually for transit. But we must understand that they receive 5 billion dollars for selling their gas to Europe. I am categorically against the continuation of the transit of Russian gas; these dollars then return to us in the form of “martyrs” and “calibers”. We helped our European partners prepare for the end of this transit. They were given three years to build logistics and enter into new contracts,” the former head of the Ukrainian Gas Transmission System Operator Sergei Makogon is convinced.
And in general, the tariff for transporting Russian gas itself is not too high. It is only about 30 dollars per thousand cubic meters.
Since the start of the full-scale invasion, the Ukrainian government has denied even the possibility of new negotiations with the Russians. Both Prime Minister Denis Shmygal and the head of Naftogaz Alexey Chernyshev spoke about this.
The EU refuses Russian gas, but there are nuances
The European Union has also taken a course towards abandoning Russian gas. And this became a real disaster for Russia. Before the full-scale invasion, Gazprom sold more than 150 billion cubic meters of fuel to the EU. At that time, 40% of all Russian gas exports. Now supplies have decreased tenfold.
Germany, which relied on these resources even before 2022, managed to completely abandon fuel from Russia. Gazprom was gradually forced out of the European gas market, and now Norway is the largest supplier.
Russia has also had a hand in cutting its own supplies. After 2022, Gazprom single-handedly stopped pumping fuel to, for example, Finland and Poland. Moscow wanted to drop into these countries and put pressure on them. But the demonstrative Russian blackmail failed: both Finland and Poland managed to find alternative suppliers.
Currently, Russia has only two land routes for transporting gas to the EU: through Ukraine and Turkey. Last year, the total transit of Russian gas to the EU through the Ukrainian system amounted to about 12 billion cubic meters of gas.
Several EU countries continue to buy fuel from Gazprom. Let's say Austria never found an alternative. The share of Russian gas in total imports since the beginning of the year has been about 90%.
Hungary also buys gas from Russia. The government of Viktor Orban concluded a contract with Moscow for 15 years. Moreover, Hungary receives most of its fuel not through Ukraine, but through the Turkish Stream gas pipeline. It doesn't look like Viktor Orban is going to reduce his country's dependence on Russian resources. After the full-scale invasion, Hungary entered into an additional agreement with Gazprom and fuel supplies were greatly expanded. This policy of Budapest contradicts the position of the European Commission.
“We knew that Russia is an unreliable gas supplier, and all our risk assessments were designed in such a way that at one point Europe could be left without Russian gas supplies,” European Commissioner for Energy Kadri Simson said during a visit to Kyiv.
At the beginning of this year, the leadership of individual EU countries openly called for the continuation of the transit of Russian gas through Ukraine. We are mainly talking about the Prime Minister of Slovakia, who does not even try to hide his sympathies for Russia. At the end of January, he met with the head of the Ukrainian government Denis Shmygal. Robert Fico said that Ukraine is ready to extend the gas agreement with Russia. He assured that we are talking about the interests of not only Slovakia, but also the interests of Italy and Austria, which also buy fuel from Gazprom.
But the Ukrainian government categorically denied this statement. They said: there will be no new negotiations on gas transit with Russia.
“We must understand that gas is a source of political corruption in Europe. We don’t know at what prices Slovakia buys it from Russia, the same with Hungary. But we see how the leadership of these states behave, which take an obviously anti-Ukrainian position and block issues that are quite important for Ukraine,” said Sergei Makogon.
Transit of Azerbaijani gas: why is this for Russia?
Azerbaijan became a mediator in the negotiation process on further gas transit through Ukraine. This information was confirmed by presidential adviser Hikmet Hajiyev: officials from the European Union and Ukraine made this request.
The Cabinet of Ministers did not respond to such a statement. But back in March, Prime Minister Denis Shmygal reported that Ukraine does not plan to renew the contract with Gazprom. But European partners can take the initiative and take on the responsibilities of a transit gas through the Ukrainian pipeline.
“We will find out in the near future whether there are reasons to think that transit will continue. When the Gas Transmission System Operator's auctions for capacity for next year take place in July. If someone comes there and books it: entry from Russia, exit on the western borders - and shows the contracts, then we can talk about something. But I doubt that this will happen,” said Roman Nitsovich, director of research at the DiXi Group Analytical Center.
It is not known for certain what Azerbaijan’s role is in this. After all, neither Baku, nor Kyiv, nor Brussels will officially publish the details of the negotiations. Moreover, Ukraine has not even confirmed that such negotiations are ongoing.
According to Bloomberg, among the options the EU is now considering transit through the Ukrainian gas transportation system not of Russian gas, but of Azerbaijani gas. The scheme looks like this: European companies buy fuel from Azerbaijan and pump it into Russian networks. The gas then transits through Ukraine to the EU.
“Will it be Azerbaijani gas or Russian gas, which Azerbaijan buys and then resells? We must remember that Russia is in a very difficult situation with its gas. There is no sales market, except that supplies to China have been increased. And the Kremlin has a question of what to do next: seek international assistance, raise tariffs or look for ways to return to the European market,” said Andrian Prokip, an energy expert at the Ukrainian Institute of the Future.
This is not the first attempt by the European Union to negotiate new gas supplies from Azerbaijan. True, earlier there was no talk about pumping fuel through Ukraine. Slovakia, in particular, expressed its interest in Azerbaijani gas. During a trip to Baku, Prime Minister Robert Fico emphasized that if an agreement is concluded, his country will be able not only to buy the resource, but also to supply it to neighboring countries.
“When this idea about Azerbaijani gas arose, it was easy to read Russian ears behind this intention. Firstly, there is no direct pipeline from the South Caucasus towards Ukraine. Therefore, one way or another we are talking about a certain gas replacement scheme. That is, part of Azerbaijani gas can be supplied to Russia for the needs of the North Caucasus region. And part of Russian gas can be sent in transit to European buyers. Secondly, Azerbaijan does not have a significant amount of excess gas,” noted Mikhail Gonchar, an expert on international energy security and president of the Strategy XXI Center for Global Studies.
For the first time in a quarter of a century, Russian Gazprom became unprofitable. At the end of 2023, the company suffered losses of almost $7 billion. Not the last time due to the loss of the European market.
“Russia wants to return to the European market, they really need it. But stopping transit will have no consequences for Ukraine. Purely technically we are ready. This does not affect our ability to transport gas and distribute it throughout the country,” said Andrian Prokip.
Even close cooperation with China, where gas supplies increased by 16 billion cubic meters last year, does not help Russia. The Kremlin is also trying to promote the idea of building another gas pipeline - Power of Siberia-2. But Chinese partners are demanding preferential fuel prices from the Russians.
