Russian Gas Transit Across Ukraine Post-2019 – pipeline scenarios, gas flow consequences, and regulatory constraints

The future of the transportation of Russian gas to Europe is wide open. The role of Ukraine, historically the main transit corridor, will change after the current transit contract between Gazprom and Naftogaz Ukrainy expires on 31 December 2019. Gazprom has already substantially reduced the volumes of gas it transits across Ukraine, and expressed its intention of reducing the level further by means of transit diversification pipelines (Nord Stream, Turkish Stream, etc). While that strategy is broadly supported by the largest purchasers of Russian gas in Europe, in Brussels there is political opposition, in addition to regulatory barriers to the pipeline projects. Tensions over these issues have risen sharply as a result of the Ukrainian political crisis of 2014, the annexation of Crimea, and the resulting deterioration of Russia-Ukraine and Russia-Europe political relations. In contrast to the wealth of commentary that has appeared about the political issues, this paper focuses on the natural gas trade itself. It includes scenarios that allow a comparison of Gazprom’s long-term contractual commitments with possible gas flows in the 2020s through existing and possible future pipeline networks; it considers the regulatory issues and obstacles to building new large scale infrastructure of the kind Gazprom proposes; and it looks at the possible commercial and contractual frameworks for future gas transit across, and gas supply to, Ukraine.

By: Simon Pirani , Katja Yafimava