‘Gas War’ Averted: Russia & Ukraine Agree To Crucial Transit Deal, Defying The Hawks

This isn’t supposed to happen according to those neo-Cold War pundits who keep telling us Putin is not only bent on taking over Ukraine, but Europe as well — especially through gas and energy dominance.

Per FT, a major gas transit deal has been reached between Ukraine and Russia “in principle” and will likely be imminently signed into effect by Moscow and Kiev leadership, ultimately ending a standoff after Ukraine ceased buying gas directly from Gazprom in 2015:

European natural gas prices fell sharply on Friday after Russia and Ukraine reached a provisional deal to allow the continued transit of gas to Europe in the new year. A stand-off between the two countries had threatened to disrupt supplies to Europe when the existing contract expires on December 31.

…Late on Thursday, Russian energy minister Alexander Novak and his Ukrainian counterpart Oleksiy Orzhel said they had struck an agreement in principle for a new contract, adding that talks were set to continue in Minsk on Friday. 

“Our work today has been very efficient . . . the final protocol of the decision, which brings us closer to the signing of the final agreements, has been drafted,” Ukrainian negotiator Orzhel said of the talks, which were mediated by the European Commission in Berlin.

And just like that, the central rationale for new US sanctions targeting companies laying pipeline for the massive Gazprom-Europe Nord Stream 2 natural gas pipeline to Germany has been made mute and obsolete. Ironically the Nord Stream 2 sanctions are included in the 2020 NDAA which is about to cross Trump’s desk, which ultimately aim to derail the project. The controversial 760-mile project that would allow Russia to export natural gas directly to Germany has been slammed by Washington as depriving Ukraine of badly needed gas transit fees along the current route for Russian supplies.

The US administration and media pundits have also charged Russia with attempting to compromise and intervene in Europe’s energy independence for the sake of geopolitical leverage. And yet four years after the Crimea crisis, and more importantly just after Ukraine’s Zelensky met with Putin a couple weeks ago in Paris, compromise and the defusing of tensions are in the air, despite US punitive measures and attempts to step in between.

The FT report continues:

Reports that both sides are closer to avoiding a third gas crisis since 2005 knocked prices across Europe on Friday morning, with UK contracts for delivery in January down 7 per cent to 36.25 pence per therm. Prices in the Netherlands dropped by a similar amount to €14 per megawatt hour.

…The gas price plunge stands to benefit Ukraine as it continues negotiations with Russia not only on the preliminary agreement on prolonging transit to European markets but also on the price and conditions for restoring Russian gas supply for domestic consumers.

This means that 2020 will witness Russian gas flow as normal across Europe via Ukraine.

Crucially, Ukraine gains some $3BN annually as Gazprom is responsible for over a third of the gas consumed in the EU, which must pass through the country in transit to central, southern, and north-west Europe.

This is also yet more confirmation, as we reported this week, US sanctions on Nord Stream 2 are too little too late to have any effect. This is why some in the Trump administration have already conceded defeat.