12/02/24View in Browser

Russian gas to Europe changes route

By Georgi Gotev | @GeorgiGotev

Russia’s aggression against Ukraine produces images of Armageddon-type destruction: Mariupol, Bakhmut, now Avdiivka.

But against this background, there is a place in Ukraine that seems secure: the route of the pipeline still transporting Russian gas across the country to clients in the EU.

Although an onshore pipeline is extremely vulnerable in times of war, some call the Sudzha-Urengoy-Pomary-Uzhhorod pipeline (formerly known as the Brotherhood pipeline) the safest place in Ukraine.

Remarkably, the 4,500 kilometres-long pipeline remains intact as the war approaches its two-year anniversary.

Business is business. Both Russia and Ukraine are making all efforts not to inadvertently damage the pipe, which continues to transit Russian gas to Europe and bring foreign currency to Moscow and Kyiv.

Kyiv stopped buying Russian gas after Moscow annexed Crimea in November 2015. After Russia’s full-scale invasion in 2022, many EU countries stopped buying Russian gas, but some continued, and Gazprom continued to pay Ukraine a transit fee for the commodity.

Ukraine’s Naftogaz and Gazprom signed in December 2019 a five-year gas transit agreement under ship-or-pay terms, meaning Gazprom is obliged to pay for transit whether it uses it or not. Ukraine counts on gas transit revenues worth $7 billion until the deal expires in 2024.

Before the 2022 invasion, some 40 billion cubic meters per year (bcm/y) were contracted to flow annually via the “Brotherhood” pipeline. Today, the figures are much lower. Of the Russian gas transiting Ukraine in 2023, 6 billion bcm went to Austria, 6.5 bcm to Slovakia and 1 bcm to Hungary.

Ukraine indeed stopped buying gas from Russia in November 2015 but instead buys it indirectly from traders in the EU as part of the Russian gas that transits through Ukraine via the so-called “reverse flows”.

The agreement is set to expire at the end of 2024, and Ukrainian Energy Minister German Galushchenko ruled out last August the prospect of Kyiv taking part in any talks with Russia regarding future arrangements for gas transit.

In all likelihood, the contract will end on 31 December 2024 without renewal.

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French Foreign and European Affairs Minister Stephane Sejourne (C), German Foreign Minister Annalena Baerbock and Polish Foreign Minister Radoslaw Sikorski (L) arrive to attend Weimar Triangle talks at the Chateau de La Celle Saint-Cloud near Paris, France, 12 February 2024. EPA-EFE/SARAH MEYSSONNIER / POOL MAXPPP OUT

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The Roundup

The European Commission launched a consultation on a draft proposal to phase out the use of the controversial chemical Bisphenol A in food contact materials, including plastic boxes, protective coatings for cans, and food processing equipment.

Austria’s dependence on Russian gas has increased from 80% to 98% in two years, prompting the country’s energy minister to ring the alarm bell ahead of a national election due to take place in the autumn.

Respondents fear climate-change-driven migration more than the security threat posed by Russia, according to a fresh survey for the Munich Security Conference (MSC) published on Monday.

A court-mandated rerun of the 2021 national election in Berlin on Sunday changed little about the composition of the federal parliament, but voters punished the Social Democrats of Chancellor Olaf Scholz (SPD/S&D) while overall, his three-party ruling coalition lost one seat.

EU telecom associations have criticised the course pursued by negotiators on the Gigabit Infrastructure Act, saying the text will allow the speeding up of telecom infrastructure roll-out but will have a minimal impact due to shrinking returns on investments.

Top European officials have rejected former US president Donald Trump’s comments suggesting that the United States might not protect NATO allies who are not spending enough on defence from a potential Russian attack

Look out for…

  • Commissioner Janusz Wojciechowski participates in Global Food Forum, organised by Farm Europe, on Tuesday.
  • EU-Armenia Partnership Council on Tuesday.
  • Commissioner Mairead McGuinness delivers speech at Eurocommerce Annual CEO Summit on Wednesday.

Views are the author’s

[Edited by Zoran Radosavljevic/Alice Taylor]

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