Putin does not rule out gas deal with Ukraine under EU rules

Russia will be ready to work under EU legislation and
sign a contract with Ukraine for natural gas transit under EU rules if Ukraine
manages to implement such EU gas legislation by end-2019, Russian President
Putin told reporters at the Russian Energy Week forum in Moscow. In the other
case (which Putin said he believes to be more likely), Russia will be ready to
extend the existing gas contract with Ukraine for about one year. Putin also
said that the deal “should be economically feasible for all participants,” as
reported by the Interfax news agency.

Recall, the 10-year contract for the transit of
Russian gas through Ukraine expires on Jan. 1, 2020. The parties met last time
on Sept. 19 in Brussels to talk about a new deal, with little tangible result.
Among the Russian demands for a new deal was for Naftogaz to refuse USD 2.56
bln compensation from Gazprom awarded by the Stockholm court in
February 2018.

Alexander Paraschiy: Media
reports spent the day touting Putin’s alleged readiness to sign a long-term
deal providing Ukraine implements EU legislation. Upon closer examination
however, we do not see any change in rhetoric from the Russian side as compared
to what we’ve been hearing in recent weeks. Neither do we see any indications
of a sincere willingness to sign a long-term deal with Ukraine.

Instead, Putin’s comment on the need for the deal’s
“economic feasibility” merely repeats the position of Russian Energy Minister
Aleksandr Novak voiced on Sept. 19. Ukraine and Russia should agree on a “zero
option” in their arbitration hearings, he said, claiming that this is important
to secure the “economic feasibility” of gas transit though Ukraine. Five days
afterwards, Novak clarified that “zero option” means
no financial claims from either side.

That said, we see that Russia has not changed its
position and that there is little chance for a new gas deal.