Behind the Scenes Of the Ukraine-Russia Gas Deal

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Behind the Scenes Of the Ukraine-Russia Gas Deal

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Representatives of Russia and Ukraine signed a protocol on gas transit and claims settlement following the results of gas negotiations in Minsk on December 20.

According to Alexey Miller, the chairman of Gazprom’s Management Committee, Russia’s Gazprom and Ukraine’s Naftogaz may sign a contract on transit of Russian gas through Ukraine for 5 years, the volume of gas transit in 2020 will amount to 65 bln cubic meters, and in 2021-2024 – 40 bln cubic meters annually.

Miller said that the agreement would envisage “a waiver of any new claims, withdrawal of arbitration and legal claims that did not result in final decisions and a payment in line with the verdict of the Stockholm court.”

The gas agreements include an increase in the transit tariff, the payment of almost $3 billion ($2.9 billion) to Ukraine by the decision of the Stockholm arbitration until the end of 2019. It should be noted that the Ukrainian dept for Russian gas supplies is now about $3 billion. Nonetheless, the Kiev leadership rejects any set-off proposals and demands a direct payment of $3 billion from Russia. At the same time, the Ukrainian side does not even consider a possibility of  returning its $3 billion dept to Russia anytime in the near future. So, the agreements are not equitable.

Ukraine’s fiscal revenues in 2019 are expected be reach $36.97 billion. Therefore, the $3 billion payment from Russia is equal to approximately 8% of Ukraine’s annual fiscal revenue.

According to Ukrainian sources, Ukraine receives approximately up to $3 billion per year as gas transit fees from Russia. In 2019, Russia transited about 87 bln cubic meters through Ukraine. Ahead of the gas agreements between Moscow and Kiev, Russian President Vladimir Putin announced that Russia is to continue selling gas to Ukraine with a 25% discount. In own turn, Ukraine sells gas to its businesses and population at market-bases rates under demands of the IMF. This situation would allow the Ukrainian government to get up to $1.5 billion of revenue.

The money received by the Kiev regime will be used to pay loans to the IMF and EU instituations and increase military expenditures to combat the so-called “Russian agression”. Ukraine’s 2020 national budget includes more than UAH 245 billion (about $9.9 billion) for security and defense. In the 2019 budget, the spending on security and defense was about UAH 185 billion (about $8 billion). This is the increase of 23%.

Furthermore, the Ukrainain Prime Minister revealed that the years of 2019-2021 will be the peak period of paying external obligations to Western creditors – the IMF and EU institutions. The total spending planned in Ukraine’s 2020 national budget is UAH 1195.3 billion ($48 billion). The main expenditure item is the public debt managment: UAH 141 billion ($5.7 billion).

Meanwhile, the US sanctions against the Nord Stream 2 and TurkStream gas pipelines came into force. The announcement was made the US Treasury on December 20.

“According to the department, in order to comply with the US sanctions regime, parties that intentionally sold, leased or provided vessels participating in the laying of pipes at a depth of 100 feet and more as part of the construction of the Nord Stream – 2 and TurkStream gas pipelines, should ensure that these vessels immediately cease construction activities.

At the same time, justified exceptions are possible to ensure safety of the pipeline itself, crews of ships and other people, as well as to preventing environmental damage or other significant damage,” TASS reported.

Following the announcement by the US Treasury, Switzerland-based Allseas pipe-laying company reported suspension of pipelay activities in the framework of the Nord Stream 2 project. At the same  time, Nord Stream 2 AG announced that the companies participating in the construction of the Nord Stream-2 gas pipeline will work to complete the project as soon as possible.

Despite this, the US sanction pressure cannot be the adequate reason for the Russian decision to reach such gas agreements with Ukraine. The 1-year agreement on the gas transit could be explained as a measure needed to secure own interests if Ukraine and the West violate the reached agreements, or Ukraine conducts aggressive actions against Russia. However, the length of the reached deal is 5 years. An interesting fact is that this covers the period until the next presidential election in Russia. Therefore, persons leading the economic bloc of the Russian government secured the revenues of energy corporations for the period while Putin reliably occupies the post of the Russian President.

In these conditions, a likely explanation is that Russia is using Ukraine to make an indirect payment to the EU and the Euro-Atlantic bureaucracy expecting that the EU and the European bureaucracy will keep a particular stance towards questions critical for Moscow. Such questions are the situation with the Nord Stream 2, additional anti-Russian sanctions by the EU or EU states, the position of Paris and Berlin towards the Normandy Format, maybe the question of security of the financial assets of the Russian elite in Europe, and many others.

Taking into account the need of Ukraine to pay their obligations to European and international creditors, the gas agreements between Kiev and Moscow could be treated as the matter of money. This also explains why the West was pressuring Russia to make such a deal. The EU and the IMF were interested to get their funds from Ukraine. Without Russia, this would be hardly possible. By signing a gas deal with Kiev, Moscow agreed to indirectly pay Ukrainian debts to foreign creditors and sponsor the Ukrainian defense budget.

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  • Neo Onh

    Bad, bad , bad…Russia paying EU and sponsoring Banderastan terrorists….but somehow I don´t think this is final. Russia must get the 3 bil euro loan back

    • Z.P.

      There is time for everything and this is not right time for settling affairs from the past with “Banderastan terrorists”. That moment will come for sure but not yet.
      ‘Revenge is a dish best served cold’

      This way Russia takes away a biggest excuse for US to block North Stream2 and Turk Stream.
      So US now looks like bully harassing Germany and other EU allay countries that participate in Russian project.
      And for Russia it is much more important to start North Stream and Turk Stream than to block all the gas for Ukraine. Also keeping opened Ukraine gas access Russia prevents her own dependence on
      North Stream2 and Turk Stream.

      Russia plays long game always The game that is understood only when period of time passes by and everything is seen from time distance.

      • “This way Russia takes away a biggest excuse for US to block North Stream2 and Turk Stream.”

        The US will continue blocking “North Stream2 and Turk Stream” with or without excuses, no matter what Gazprom says or does.

        I mean – United States of America wants Gazprom dead and will stop at ABSOLUTELY nothing to achieve that goal.

        It is even more straightforward “deal” with Ukraine. Ukraine will take and take and take and take, will give absolutely nothing in return apart from more vicious abuse and harassment of the Russian speaking population and demand more and more and even more. Simple ..

        • Z.P.

          “The US will continue blocking “North Stream2 and Turk Stream”

          I agree they will do that
          But only if they can stop it. If Russian “Gazprom” finishes the pipeline they can’t stop them .
          “Gazprom” is not susceptible to their “sanctions” like Europeans are.
          Well there is way to “achieve that goal”.
          The only way to have “Gazprom” dead is to nuke Russia.
          But since they still don’t know how to do it and stay alive….they will not do that.
          I don’t think they can stop “Gazprom” at all. Maybe just slow down little bit.

          “Ukraine will take and take and take and take and take and take”
          I am surprised that after so many “take” you forgot completely to put “steal” also… at least few times. :-)
          I agree that there is suffering but than Russians have strong Russia that waits for them with open arms, to emigrate to.
          It is not perfect solution but it is much better than no solution.
          Ukraine was part of Russia for centuries and these are the consequences…ugly reality of the situation.
          This are all the consequence from the “October Revolution” to Gorbachev and Yeltsin that must be paid by somebody.
          And that somebody is always ordinary people.
          It must be accepted that any forced divorce is not easy. No way around that problem.
          The essence of the bigger picture is that Russia will get out of all those problems (including sanctions) much stronger economically , militarily while the decadent US is in downward spiral heading even toward civil war and collapse of the dollar.
          In due time all problems with Ukraine will be resolved and Ukraine (the way it is now ) will cease to exist and ethnic Russians will go back again to Mother Russia.

          • “I am surprised that after so many “take” you forgot completely to put “steal” also… at least few times. :-)”

            “steal” is a technical term for “take”. It is the latter that Ukrainians at large use all the bloody time.

            “I agree that there is suffering but than Russians have strong Russia that waits for them with open arms, to emigrate to.

            It is not perfect solution but it is much better than no solution.

            Ukraine was part of Russia for centuries and these are the consequences…ugly reality of the situation.”

            As a matter of fact, people don’t normally want to leave their homes, wherever it might be.

            What is Russia anyway .. Russia is a multicultural, multiethnic, multi-confessional federation. As Germany and the United States.

            Historically, most of today’s eastern Ukraine is absolutely nothing to do with Ukrainian ethnicity, culture or in fact religious heritage.

            “In due time all problems with Ukraine will be resolved and Ukraine (the way it is now ) will cease to exist and ethnic Russians will go back again to Mother Russia.”

            The above quoted appears to be a very categorical, not to mention highly dangerous forecast of sorts, bordering on purposefully provocative prevarication.

            Historically, those who claim that they can forecast the future are normally proved wrong, in the long term anyway.

            Hope that helps.

          • Z.P.

            “”steal” is a technical term for “take”. It is the latter that Ukrainians at large use all the bloody time.”
            ——-
            I was trying to make joke only, so lighten up little bit.
            If one is under too much strain, nothing good comes from that kind of attitude
            ———
            As a matter of fact, people don’t normally want to leave their homes, wherever it might be.
            ——
            No shit?
            And what exactly makes you think I don’t know all that?!
            You take me for an idiot or you just like to lecture people?
            I was even refugee from war myself !
            As long as people have basic choice to choose place where they can leave in peace with assured decent standard of living it is GOOD. Far from perfect but good enough !
            People in Donbass will be accepted in Russia as refugees with ready citizenship to get job and have decent living. Many of them keep their houses and apartments in Donbass to sell them later on when war stops.
            But you prefer to create drama, since you care about them more than Russians huh?
            —————

            “Historically, most of today’s eastern Ukraine is absolutely nothing to do with Ukrainian ethnicity, culture or in fact religious heritage.”
            Yes and no.
            —–
            Yes; tell that to those from Ruthenia, Galitzia that they are Russians …They will laugh their heads off.
            Ukraine is now ARTIFICIAL state but state all the same.
            This Ukraine today is communist origin anomaly and product of many things like; WW2 conquest, Slavic extermination, Austrian expansions, proselytic Catholicism and many other factors etc.
            There are some ethnicities that better shouldn’t be there in Ukraine.
            But they are there, that’s the way it is.
            So Ukrainians are what they are now and if they really want to become separate identity they shouldn’t be terrorizing and forcing their NAZI bullshit against ethnic Russians. Or label Russian culture and identity as their own.
            ——-
            Historically, those who claim that they can forecast the future are normally proved wrong, in the long term anyway.

            Hope that helps.
            —–
            No that didn’t help at all.
            And I don’t see you capable (yet) to give that kind of advice’s of that kind
            My prediction is linked with many other things I have “predicted”
            And I am one of many with the prediction like ; collapse of the dollar -US dwindling into regional power, EU falling apart, NATO falling apart, economic depression and falling apart of Ukraine and very probable war between Turkey and Greece.

            So I don’t think I’m “prophet” or as you call me “wrong”. I am just regular Joe who (like many other like me) believed in those things and still firmly believe.
            And even if I took all of those statements out of the mouth of some experts (because plenty of true experts were talking on those subjects)
            I GENUINELY BELIEVE that is going inevitably to happen (when and how exactly I don’t know but it will happen in near future)

            Now Marry Christmas and happy new 2020 !

          • You are far too crude, not to mention twisted, Z.P full stop.

            Apart from that you are not exceedingly bright, although you do try your absolute best apparently.

            You must be a second or third generation Ukrainian currently employed by the sbu after all.

            Otherwise, have a lovely day.

            See you around, no doubt ..

          • Z.P.

            And that’s all you have to say?!!?
            No counter arguments, no nothing?!!
            I am not “bright” and “3rd generation Ukrainian” ?!!
            WTF?!
            OK show everybody how” twisted” , “crude” and “not bright” I am if you can!
            I am waiting your arguments so that you can show how brilliant you are!
            You are not first loser to label me a “not bright” or similar.
            After vomiting your anti Russian propaganda in some comments and accusing me first to be Jew and now even Ukrainian.
            You have no capacity to back anything loser!
            That is all you have to say?!

            Well your reactions are ridiculous.
            I am 100% sure that you have no clue on Russia and Ukraine whatsoever and that you have hidden anti-Russian agenda.

          • re: “?!!?”

            You need to calm down.

            The rest of your hysterical, not to mention nonsensical reply indicates that you are most likely to be exactly what I though you might be.

            Hope that helps

          • Z.P.

            Keep labeling me a**hole.
            That’s all you can.
            Didn’t hear anything “bright” from you.
            Let alone proves or arguments.
            Just perfidy and slender.

          • NATOcracy

            “Yes; tell that to those from Ruthenia, Galitzia that they are Russians …They will laugh their heads off.”

            Nowadays probably but if we could translate ourselves some 100 years back, we would see a completely different picture. Take a look, this is a Polish map of the administrative units (Wojewodztwa). Check how was the Wojewodztwo with the centre in Lvov called…

            https://i.imgur.com/vkiXTuq.png

            Or take a look at this, this is a newspaper printed in the US by the immigrants from Galicia (Galichina), their organization was called Svoboda [Freedom], the organization of the Russian people in the USA.

            https://i.imgur.com/NT5oKem.jpg

            https://i.imgur.com/7HKOh1r.jpg

        • AM Hants

          They might want it that way, but, will they get it? No matter how many hissy fits they throw.

          I am interested to see what happens, when they realise their threats of sanctions has left them isolated? That has not dawned on the US politicians who are funded by the various lobbyists to work against the people of America. I wonder how many of those lobbyists will still be in a job, when they get around to realising they have scored a home goal?

          • “They might want it that way, but, will they get it? No matter how many hissy fits they throw.”

            Like all absolutely determined “takers” they will attempt to employ each and every trick in the book, no matter what it takes .. It is most likely that they will take when Russia is not looking, if you know what I mean.

            After all it is known that all highly “professional” and experienced kleptomaniacs are outstandingly good at it.

          • AM Hants

            Must admit, glad Russia does not fall asleep on the job and is aware she needs her eyes open at all times. Don’t know how she manages to stay so alert, in so many directions.

      • AM Hants

        I was whinging to myself about why Russia should be so generous, and agree with your explanation. Together with reading an article, over on Stalker Zone, where it shows how little gas will actually be going through Ukraine, when compared with previous transits. It is half of what went through last year and decreasing the following year. Last year, a third of what was required in 2014 went through the pipework.

        I wonder if the people of Ukraine could go back in time and vote, for the $5 billion cookie offer, from the US or the $15 billion, interest free loan and cheap gas offer from Russia, if they still believe The Maidan was worth it?

        • Z.P.

          Yes you are right in your deduction.
          This agreement is just necessary compromise, nothing else.
          Maidan Ukrainians are thieving opportunists so price must be paid.
          Russia is not yet out of the woods with their troubles with Turk and North Stream 2.
          So it is premature to antagonize or dictate anything to anybody yet.
          But many of people here are young guys, girls that talk more emotions and passion than calm, composed logic.
          I am human and I was “whinging” as well but whinging doesn’t help.
          Staying calm and trying to understand the root of the problem helps only.

          “if the people of Ukraine could go back in time and vote….”
          I don’t know.
          Sometimes people must reach really bottom to have “catharsis”, their eyes opened.
          The easiest thing to convince people is hatred because rarely goes for logical explanation.
          Those followers of Bandera who hate Russia will never understand because hate is deprived of the reason and logic.

          Marry Christmas and happy 2020 !

          • AM Hants

            Thanks for the reply and Merry Christmas and Happy 2020 (if early owing to you celebrating in the New Year, still enjoy the build up).

        • “I wonder if the people of Ukraine could go back in time and vote, for the $5 billion cookie offer, from the US or the $15 billion, interest free loan and cheap gas offer from Russia”.

          That is simply impossible.

          Apart from that most Ukrainians would not be aware of that offer anyway.

          • AM Hants

            However, do they believe things are better post 2014 or pre-2014, from personal observation?

          • Well, I can’t speak for all Ukrainian people.

            I would imagine there would be winners and losers like in any other society.

            It is common knowledge though that the most senior-thief-in-charge of Ukraine prior Zihrensky taking over – Porosyonko quadrupled his wealth in the course of his exceedingly executive “presidency” while the average income of Ukrainians halved.

          • Z.P.

            “Well, I can’t speak for all Ukrainian people”
            Of course you can’t.
            You are not Ukrainian !

      • Neo Onh

        I hope yor are right!

        • Z.P.

          I believe I am.
          The time is not yet ripe.
          Either way Russia will not be able to continue with this situation on her border forever. And that problem can’t stay frozen forever.
          But for now, exacerbating conflict with Ukraine, plays into the hands of US & NATO.
          To start big proxy war in Ukraine, against the Russia.
          To stop development of Russia by feeding Ukraine with military help and volunteers to drain as much as possible of Russian strength.

  • John

    All part of the dance. As Z.P. noted, with time we shall see what it all meant.

  • Dick Von Dast’Ard

    If the gas deal allows the Eu to drop the sanctions that Washington bullied them into making against Moscow in six months time, then it could be a reasonable accommodation.

    • Z.P.

      Donbass agreement is main condition for abandoning the sanctions on Russia.
      US will do everything in their power to prevent Ukraine from reaching that agreement.
      Since they do not want Germany and EU to normalize the relations with Russia

  • “.. a likely explanation is that Russia is using Ukraine to make an indirect payment to the EU and the Euro-Atlantic bureaucracy expecting that the EU and the European bureaucracy will keep a particular stance towards questions critical for Moscow.

    .. ..

    By signing a gas deal with Kiev, Moscow agreed to indirectly pay Ukrainian debts to foreign creditors and sponsor the Ukrainian defence budget.”

    One hundred percent correct.

    • Z.P.

      And why would “Russia be using Ukraine” for ” indirect payments”?!?
      What payments to EU?
      And do you know that “Euro-Atlantic bureaucracy” is NATO bureaucracy?
      “Euro-Atlantic bureaucracy” = EU – NATO bureaucracy
      Why would they pay anything to NATO?
      ” Moscow agreed to indirectly pay Ukrainian debts to foreign creditors”
      This comment is total slander and sounds like pure idiocy.
      Ukraine has huge debt BTW.
      Of course no proves for anything…

      Where are the proves, arguments to accompany, confirm those statements?
      To me all that sounds like pile of horse shit and Russophobe propaganda.

      So because approved by you must be truth?
      Do you have any effing proves for anything at all?
      Are you from US some conspiracy freak out of touch with Europe and understanding jack shit on Ukraine and Europe.. It certainly looks like.
      No wonder that you were accusing me to be a Jew.

      • At best you are totally confused.

        “No wonder that you were accusing me to be a Jew.”

        Once again, I have never said or implied anything of the kind.

        Where are you from originally?

        • Z.P.

          Than guy with avatar identical to yours did that.
          I cun’t be bothered now to look for that but I don’t forget insults like that
          Not your business where I am from.
          You don’t deserve even that I talk to you any more

          You didn’t even bother to give any decent answer on my comments
          except pathetic “not bright” “Ukrainian” slur.
          All you know is to push your hidden agenda and practice Russia bashing with no proves!

          I deeply resent a**holes like you.
          Always preferred and respected people who are not afraid to be anti-Russian or anti-anything else than perfidy like yours.
          State your problem with Russia before you start your propaganda stunts
          and usual spitting.
          I can’t care less to be labeled by some youngster as “Ukrainian” or “not bright”
          just don’t call me a Jew.
          And try for once to give effing PROVES for your accusations without parroting usual anti – Russian rubbish that is all over Western MSM for years already !

          • You are INDEED a deranged Ukrainian and highly abusive troll after all.

            Apart from that you are most likely to be on crack, judging by the sheer volume of your nonsensical output.

            Blocked and reported as such.

          • Z.P.

            Pathetic looser!
            As usual just labeling from you like “Jew”, “Ukrainian”, “on crack”, “not bright” etc.
            Never arguments, or proves of any kind!
            Just slander!

            I have you on the list of those with anti-Russian agenda…

  • Mehmet Aslanak

    Europe needs the energy supply versatility & Merkel agreed to buy a lot of US-gas via ships.
    Despite this, US still bully Germany in order to sanction Russia which is not a banana republic.
    So, US is losing its sphere of influence with those nonsensical sanctions.

  • AM Hants

    This summary from Stalker Zone compliments the above. must admit I do like the explanation from Stalker Zone and makes a lot of sense.

    About Russia’s New Gas Transit Agreement with Ukraine… https://www.stalkerzone.org/about-russias-new-gas-transit-agreement-with-ukraine/

    • Z.P.

      Good article, thanks!
      Short and sweet.
      Finishing up of neo-NAZI Ukraine is only slowed down but maintains direction

  • JustPassingThrough

    UE wanted 10 year contract. RU wanted a 1 year contract. So a 5 year contract was a good possibility.
    The 3B$ Stockholm settlement is small potatos.

    The fact that europe has experienced some success in these negotiations is very important.
    Then there is:

    1. It puts the US in the corner. (like bye, bye, LNG + more confidence for europe)
    2. It gets europe out of UE financially (somewhat).
    3. It reduces the influence of the IMF (somewhat).
    4. It gives Mr. Z. some breathing room.
    5. It brings the UE closer to RU.

    That’s the overt successes.
    What’s behind the curtain we will probably never see.

  • Neo Onh

    Well , the article at Stalker Zone sets things right (… https://www.stalkerzone.org…), thank you.
    I see this deal is a half shut-down! Good!
    Moreover – the ukraine is not a state or a country, it never was and never will be. The western parts are Polish/Austrian/Hungarian and the southeast – Novorossiya – all lands east of the Dnepr river and all the Black Sea coast is russian.These parts will return to Russia or become independent Novorossiya – peacefully preferably, by force if neccessary…sooner or later.

  • Douglas Houck

    Will have to see how this all shakes out. In reading Tass the Russians seem OK with the agreement. Even with Nord Stream 2 and Turkstream, Russia was still going to have to pipe ~25bcm/yr through Ukraine, and that does not include any new natural gas supply which Europe will need as their own sources dry up. Last year Russia shipped ~93 bcm through Ukraine.

    Overall, the west is trying to keep Russian gas as cheap as possible. Even though Russian gas can be cheaper than US LNG, the current oversupply of natural gas has greatly reduced the price gas producers are getting. Here is the last 10 years of Russian gas prices.

    https://uploads.disquscdn.com/images/328bb80d500078e56ee9215861142fa0429cfd6dbe0aec3d973d6bc3053fd25e.png

    At some point, when the price is below $3/mmbtus (Russian gas to Europe is currently around $4/mmbtu) it may not be worth selling. Especially with the large capital pipeline costs.