Page 8 - bne IntelliNews monthly magazine September 2024

8 I Companies & Markets bne September 2024
What makes Russian gas Russian? How Azerbaijan’s gas transit through Ukraine would likely work
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Likely, any Azeri gas that does flow through Ukraine after this year will be Azeri in name only, with the molecules originating in Russia.
WHAT: Azerbaijan says the EU and Ukraine have proposed that it supply its gas through Ukraine after the transit contract between Moscow and Kyiv expires at the end of this year.
WHY: This would ensure continued use of Ukraine’s transit system, sparing it from Russian attacks, and maintain supply to European countries still dependent on supplies transited through Ukraine.
WHATNEXT: Thesimplestoptiontoachievethiswould
be a virtual swap between Russia and Azerbaijan. The gas molecules passing through Ukraine would still be of Russian origin, but titled as Azeri.
Azerbaijani President Ilham Aliyev claimed last month
that Baku had been approached by Ukrainian and the EU authorities on the potential supply of Azeri gas to Europe through Ukraine after Kyiv’s long-term transit contract with Moscow expires at the end of this year. But Azerbaijan will struggle to find gas spare to replace Russian shipments in the short term, and any gas it does provide would have to
pass through Russia first. It is questionable whether Moscow would ever agree to such an arrangement.
Instead, it seems likely that Azerbaijan and Russia would have to enter into a swap deal. In other words, any Azeri gas that does flow through Ukraine after this year will be Azeri in name only, with the molecules originating in Russia.
Calling time on the transit contract
The current consensus among analysts is that Russia and Ukraine’s gas transit contract will not be renewed beyond its expiry at the end of December. At stake is roughly half of Russia’s remaining pipeline gas supplies to Europe, amounting to 13.7bn cubicmetresin2023.ThecountriesmostdependentonUkrainian gas transit are Austria, Slovakia and Moldova, which imported 5.7 bcm, 3.2 bcm and 2.0 bcm of Russian gas respectively via Ukraine last year, according to Norwegian consultancy Rystad Energy. Hungary, Slovenia and Croatia also rely on supplies via the route.
Ukraine is adamant it does not want to renew the transit deal with Russia, and the European Commission – which played a major role in brokering the current agreement at the end of 2019 – has said it is willing to let the contract expire. Russia has said it is open to negotiations on the subject, but has received no interest from the European side.
Azerbaijani President Ilham Aliyev claimed last month that Baku had been approached by Ukrainian and the EU authorities on the potential supply of Azeri gas to Europe through Ukraine after Kyiv’s long-term transit contract with Moscow expires at the end of this year.
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