Europe agrees to buy Russian gas bypassing Ukraine
European purchasers of Russian gas have expressed a desire to receive it through new corridors and not through Ukraine after the expiry of the long-term transit contract signed between Gazprom and Ukraine's Naftogaz in 2019, Gazprom deputy CEO Alexander Medvedev said.
He said that Russian gas giant is considering using Austria’s Baumgarten gas hub to bring natural gas to Europe via the future Turkish Stream undersea pipeline.
Speaking at the European Gas Conference in Vienna, Medvedev also said the Russian gas exports to Europe declined by 3% in January year-on-year, Reuters reported.
An associate professor of the Graduate School of Corporate Management of RANEPA, Ivan Kapitonov, speaking to Vestnik Kavkaza, said that the desire of European buyers to receive Russian gas bypassing Ukraine is largely due to political factors. "More and more often Europe makes it clear that the Ukrainian regime is unreliable," the expert said.
He recalled that the Ukrainian gas transportation system was created in the 1970s and the period of its operation is 30 years. "Infrastructure needs to be renewed, but Ukraine does not have money for it. The deterioration leads to an increase in technogenic accidents. There have and will have no money for renovation, so it's more profitable and cheaper to build new corridors," the analyst believes.
According to him, the situation is exacerbated by the political and economic confrontation associated with the construction of new transit corridors, including the Nord Stream-2. "On the one hand, Europe understands that supplies via Ukraine need to be duplicated by some other route, On the other hand, alternative routes are hindered by Europe itself on political grounds," the expert explained.
Kapitonov believes that in the end the economic factor in this issue will prevail over political one. "We saw this on the example of Russian gas deliveries to the US. I think sooner or later the same will happen with the EU. This smooth turn already can be seen, and one can hope here that thought with some delay, but Nord Stream -2 will be built," the expert concluded.
A leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, expressed similar opinion. According to him, the EU's desire to abandon the Ukrainian gas transit is logical. "Ukraine often makes contradictory statements. But, first of all, European gas consumers see that Ukraine does not invest in modernization of the gas transportation system," he explained.
According to the analyst, only the modernization of some pipes will require more than $10 billion, which Ukraine does not have. "They want to shift this to some international organizations, or to European consumers. European consumers wonder why they should do this when Gazprom proposes building input gas pipelines at its own expense," the expert explained.
However, he added that the interests of European business are in contradiction with European politicians on this issue. "European politicians have their own tasks, many of them are in favor of undermining new gas pipeline projects, while business stands for it, because it is profitable and reliable," Yushkov noted, adding that European entrepreneurs are also concerned about the unpredictability of non-institutional forces in Ukraine.
At the same time, he believes that in the end, bypass gas pipelines will be built. "There is an active opposition, especially to Nord Stream 2. But while the project is being implemented, the European Commission has recognized that it cannot ban it from building. They are trying to create conditions for the participants to abandon it themselves, but they do not do it. I think that the projects will be implemented," the expert concluded.