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The EU will try to preserve the transit of gas through Ukraine

Otherwise, it risks facing an increase in gas prices

Aug 28, 2024 13:21 207

The EU will try to preserve the transit of gas through Ukraine  - 1

Europe is interested in continuing the transit of Russian gas through the territory of Ukraine and will make efforts to preserve it, otherwise it risks facing an increase in gas prices, energy experts predict.

„The European market is primarily interested in these volumes. The transit continues practically unchanged. This means that diplomatically and commercially he is in great demand by Europe. The Russian side cannot force Ukraine to continue the transit. Only Europeans can do that. They are the ones who are interested and will make the main efforts for the transit to continue”, they point out. At the same time, the most dependent on gas from Russia are Austria, Slovakia, Italy and the Czech Republic.

President of Ukraine Volodymyr Zelensky announced yesterday that Kiev will not renew the agreement with "Gazprom" for the transit of Russian gas, which expires at the end of the current year. At the same time, he stated that after the expiration of the contract, Ukraine, together with the EU, will decide on the transit of Russian gas through its territory to Europe. Earlier, experts also noted that the extension of the transit agreement is unlikely given the political situation, but EU countries will still be able to continue buying gas from the Russian Federation through auctions with capacity reservations and moving the delivery point to gas.

The reduction or complete stoppage of Russian gas supplies is the most likely scenario, analysts emphasize. At the same time, they admit that the European mediator, whose role is now played by "Naftogaz" of Ukraine, can buy transport capacity through Ukraine, sell it to "Gazprom", take gas from it and then give it back to the Russian company on Ukraine's western border.

At the same time, experts are skeptical about the possibility of pumping Azerbaijani gas through the territory of Ukraine to the EU after the end of the transit agreement with "Gazprom". If Azerbaijan simply becomes an intermediary between the Russian Federation and Ukraine, that is, Russian gas on the border with Ukraine will legally become Azerbaijani, then this option is in fact no different from regular transit and is unlikely. At the same time, if "Gazprom" could export gas to Azerbaijan for domestic consumption, and Azerbaijan would increase exports to the EU (but not through Ukraine), then such a scheme could become part of a Turkish hub with a supply potential of only 3-4 bcm per year.

On August 6, a massive attack by the Ukrainian armed forces began against the Kursk region, where the Suja gas measuring station is located. Transit through it remains the only route for supplies of Russian gas to Europe via Ukraine. Russian gas supplies pass through Ukraine in reduced volume from May 2022, when the "GTS Operator of Ukraine" announced the termination of transit to Europe via Sokhranovka station due to force majeure. The company claims it cannot exercise control over the Novopskov compressor station in the Luhansk People's Republic. Meanwhile, the Russian gas holding saw no reason to stop pumping as before.

Despite an increase in LNG market capacity and near-record occupancy of underground gas storage in Europe, gas prices in the EU may soar above USD 500 per 1000 cubic meters amid a cold winter and full suspension of supplies through Ukraine.

If the transit of Russian gas through Ukraine is stopped or reduced, Europe will not be able to avoid higher prices on its gas market.

Previously an official representative of "Gazprom" Sergey Kupriyanov said that the events in the Suja region of the Kursk region have already led to a sharp increase in the prices of natural and liquefied gas, raising the question of who benefits from this.