The Russia-Ukraine gas transit deal: opening a new chapter | Oxford Paper - Feb. 2020 |

Gazprom and Naftogaz Ukrainy signed agreements covering the transit of Russian gas through Ukraine for the period 2020-24. It provides for 65 bcm to be transited in 2020, and 40 bcm/year in 2021-24 - a total of 225 bcm, with provisions for additional volumes to be shipped if required. The total cost to Gazprom will be about $7.2 billion. While Naftogaz is the shipper of the gas, the Ukrainian transport system is now operated by a new, separate company, Gas Transmission System Operator of Ukraine (GTSOU), which has been unbundled from Naftogaz in line with European market principles. GTSOU has signed interconnection agreements with Gazprom in the east, and with the transmission system operators (TSOs) of Poland, Slovakia, Hungary, Moldova, and Romania in the west.

The transit deal, which defied predictions that negotiations would not be completed in time, is a success for both Russia and Ukraine not only at a corporate level, but also at a political level. Indeed, it was above all a shift in political relationships that allowed it to be done. How agreement was reached is discussed in the first section of this OIES Insight; we then look at the terms of the deal, discuss the likely level of transit flows through Ukraine during the period of the deal, and then draw conclusions.

EY, commissioned by the World Bank, suggests the solution mechanisms to address the problem of unpaid off-takes of natural gas from the GTS

'Sapere aude'