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Russia-Ukraine Gas Deal to Ensure Reliable Supplies to EU, Completion of Nord Stream 2 – Analysts

© Sputnik / Maksim Blinov / Go to the mediabankThe stand with the Gazprom company's logo at the Sochi International Investment Forum 2016
The stand with the Gazprom company's logo at the Sochi International Investment Forum 2016 - Sputnik International
Moscow and Kiev argued in court for nearly five years over mutual accusations of violating a 2009 gas deal, with the court only partially fulfilling the demands of the respective parties in 2017 and 2018. But disagreements persisted despite the rulings, stalling the signing of a new gas deal.

Russia’s Gazprom and Ukraine’s Naftogaz gas companies successfully signed a new five-year deal on Russian gas transit through Ukrainian territory, ending a half-decade gas dispute, on 31 December 2019.

The signing of the deal marked a major breakthrough in Russia-Ukraine relations, several analysts believe. Fernand Kartheiser, a Luxembourgian lawmaker and member of the Alternative Democratic Reform Party, stated that it has eased tensions between the two, noting that it came after another positive development following a meeting in the Normandy format in December 2019. He added that the compromise would benefit all parties involved.

© Sputnik / Maxim BlinowGazprom
Russia-Ukraine Gas Deal to Ensure Reliable Supplies to EU, Completion of Nord Stream 2 – Analysts - Sputnik International

Dr Mamdouh Salameh, an international oil economist and professor at the ESCP Europe Business School, indicated that the deal "protects the mutual interests of both countries economically and geopolitically". He added that it could also pave the way for further improvement in the two countries’ relations. Francis Perrin, a senior fellow at the French Institute for International and Strategic Affairs, agreed with Salameh, noting that the new gas contract reflects the improvement in the relationship between Russia and Ukraine and would not have been possible without the willingness to compromise on both sides.

"Compromise is a key word in order to understand this deal. All outstanding arbitration and judicial claims are discontinued, which will eliminate the legal risks for both parties", Perrin said.

Ensuring Gas Supplies to EU

Another major effect that the new gas deal will have is that now Moscow's gas supplies to Europe are secured, making Gazprom a more "reliable partner" in the EU's eyes, Kartheiser said. Salameh agreed with the lawmaker, noting that the gas flow via Ukraine will not be disrupted in 2020. He also said that Gazprom had removed the threat of its assets being seized in Europe by agreeing to pay $2.9 billion to Ukraine under the decision of the Court of Arbitration in 2018.

Francis Perrin sees Gazprom's readiness to reach a compromise with Kiev as a way to ensure a smooth start for Nord Stream 2, as even the main defender of the project, Germany, had been demanding that Russia not leave Ukraine without a source of revenue from gas transit following the launch of the new pipeline. He added that because Nord Stream 2 is one of Gazprom's key projects, the company sought to make sure that it gets accepted in the EU.

At the same time, the analyst pointed out that only time will tell if the new deal between the Russian and Ukrainian gas companies will stand and not be violated by either side, as has happened in the past with previous gas deals.

"At the end of the day of course the real test will be the strict implementation of the different provisions of this deal by the parties but each day has enough trouble of its own. Time will tell as usual. But so far so good", Perrin said.

Thierry Bros of the Davis Centre for Russian and Eurasian Studies at Harvard University, in turn, noted that by inking the deal with Naftogaz, Gazprom has secured both a reliable transit through Ukraine as well as demand in the EU, where it will be able to preserve its market share. He also argued that the new contract ensures the security of energy supplies to Europe and will bring down gas prices a bit.

Geopolitical Importance of New Deal

Dr Pierre-Emmanuel Thomann, a geopolitical expert, pointed out that the new gas deal will bring the signatories not only economic, but also political benefits. Namely, for Russia it's a way to ease the burden on Ukrainians from the conflict between the two countries' governments, which in turn might prevent the strengthening of the West’s support for Ukraine. The latter is not in Moscow's interest, Thomann added.

The geopolitical expert also said that striking the new gas deal with Russia was important for Ukraine, which wanted to show the world that it's capable of negotiating with the Kremlin and defend its revenue sources. Additionally, Kiev managed to somewhat stabilise its relations with Moscow by inking the contract, Thomann stressed.

"It can hopefully pave the way for more trust between all parties and contribute to the slow and long process of normalisation of relations between [the] EU and Russia", Thomann concluded.
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