Russia Plans to End Ukraine Gas Transit for New Route After 2019

Russia is planning to let its natural gas transit contract with Ukraine expire in favor of a route it seeks to build under the Black Sea or supplies to Asia.

Europe should start preparing now to accept fuel through Turkish Stream, once the pipeline is built, or see volumes shifted to Asia, Alexey Miller, the head of state-run gas exporter OAO Gazprom, said Monday at an energy conference in Berlin.

The European Union has been seeking to broker an interim deal between Russia and Ukraine to protect gas flows through March 2016 as the former Soviet allies fight over prices and debts in international arbitration. Ukraine plays a key role in the EU’s energy security, carrying more than 10 percent of the 28-member bloc’s gas through its pipelines from Russia even as Gazprom seeks to build pipeline circumventing its neighbor.

Trying to hinder Turkish Stream “is a very serious mistake,” Miller told a conference in Berlin, accusing the EU of scuppering its earlier-planned South Stream link to help Ukraine maintain transit. “First, all these volumes may go to other markets. Second, and i want to direct your attention our competitive advantage -- we can sustain a pause.”

Russia plans to let its transit contract with Ukraine lapse from 2019, Russian Energy Minister Alexander Novak told reporters on the sidelines of the conference, saying that the country will remain a reliable supplier even if Turkish Stream isn’t built.

‘No Halt’

“The likelihood of an extension is minimal,” Novak said of the contract. Still, “no one plans to halt supplies” to Europe.

The EU and Russia, which plans to remain one of its biggest gas suppliers through 2040, need to compromise to ensure energy security in the region, he said.

In October, the EU brokered a five-month deal between the countries to ensure stable supplies through the cold season, including a gas-price discount of about 30 percent and a waiver on take-or-pay fines levied for fuel Ukraine hasn’t imported but is obliged to pay for under contract. Last month, Russia signed similar temporary agreement with Ukraine through June, saying it would decide on any further agreements quarterly because of volatility in the gas market.

Russian, Ukrainian and EU energy officials postponed talks on further gas agreements that were scheduled for this week. The sides need more time to prepare, the European Commission and Russian Energy Ministry said last week. There are no urgent issues now, Novak said Monday.

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