Russia, Naftogaz share their vision on gas transit after 2019

The Russian Foreign
Ministry press service listed the conditions of extending transit of Russian
natural gas though Ukraine beyond 2019 in its Aug. 2 release. Preserving
transit “would be possible only if Kyiv would offer competitive transit rates
and eliminate transit risks, including the wihdrawal of all claims and the
cancellation of absurd legal actions against Gazprom.” The statement did
not specify what legal action the Russian side considers “absurd.”

In response to the
statement, Naftogaz COO Yuriy Vitrenko wrote in his blog that “nobody will
withdraw absolutely grounded claims against Gazprom,” referring to Naftogaz’s
complaints in the Stockholm arbitration court against 10-year gas purchase and
gas transit contracts signed in early 2009.

Regarding
“competitive transit rates,” Vitrenko explained that the Ukrainian side is
allowed by EU rules to include accelerated depreciation and amortization costs
into the transit rates (based on the expected life of the transit system of
three years, or until the transit contract with Russia expires). Naftogaz is
demanding in the courts to include increased D&A charges into the rate,
stating that such
claim is well-grounded.

Alexander
Paraschiy: Besides
Naftogaz’s court complaints in Stockholm, there is another “claim” against
Gazprom that the Russian side could treat as absurd – namely, Ukraine’s
Anti-Monopoly Committee’s decision to penalize Gazprom for UAH 170 bln (over
USD 6 bln) for breaching Ukraine’s anti-trust legislation. Ukraine withdrawing
all its claims does not look realistic or logical, so the base-case scenario as
of now is that Russia will stop transiting its gas though Ukraine to EU
countries as of early 2020.

Therefore, Naftogaz’s decision to fully amortize the transit system by
end-2019 looks logical. Also it means there is a high risk that Ukraine will
lose a significant part of its export
revenue from transit services starting 2020, which
will worsen the country’s current account balance by up to USD 2 bln p.a.