Gazprom ignores meeting on gas transit through Ukraine

Representatives of Russian Gazprom (GAZP RX) did not
sign up for trilateral technical consultations scheduled for Jan. 15 to discuss
a future deal on Russian natural gas transit though Ukraine as of 2020, the
Ukrainian side reported the same day. The meeting precedes a high-level
political trilateral meeting (between Ukraine, Russia and the EU) scheduled for
Jan. 21. Naftogaz deputy CEO Yuriy Vitrenko highlighted that Gazprom neither
warned nor explained the absence of its representatives at the technical meeting,
concluding that there is no chance to reach any agreement on Jan. 21. Recall, a
10-year contract of natural gas transit between Ukraine’s Naftogaz and Gazprom
terminates in late 2019.

Alexander Paraschiy: We share
Naftogaz’s expectations that no agreement on the future transit of Russian
natural gas will be reached soon. Moreover, we are skeptical about any deal
being reached even by the end of 2019. Meanwhile, Gazprom plans to
significantly cut the transit of its gas though Ukraine once it launches the
Nord Stream 2 pipeline providing gas supplies directly to Germany in 2020.

We continue to believe that for the Ukrainian side,
the optimal solution of the gas issue is to make EU gas traders buy Russian gas
at the Russia-Ukraine border and let them transport gas though Ukraine to the
EU without the involvement of the Russians. But, so far, Gazprom is doing all
it can to prevent this, and the lack of clarity about the future legal status
of the Ukrainian transit pipeline plays in favor of Gazprom. All in all, we
expect Ukraine’s transit of Russian gas will plunge by at least USD 1 bln in
revenue next year.