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Thursday, January 30, 2020

Europe Cedes Opportunity in Russia-Ukraine Energy Deal

Russia in Review is a weekly intelligence summary (INTSUM) produced by the Institute for the Study of War (ISW). This ISW INTSUM series sheds light on key trends and developments related to the Russian government’s objectives and its efforts to secure them. Receive future Russia in Review INTSUM products via-email by signing up for the ISW mailing list.

Authors: George Barros and Nataliya Bugayova

Key Takeaway: Europe missed an opportunity to counter Russia in late 2019 in allowing the Kremlin to pressure Ukraine into an unfavorable gas deal. The Kremlin secured an energy deal with Ukraine, largely on its terms, despite a relatively weak negotiating hand. The deal provides Ukraine short-term financial benefits but strips Ukraine of its leverage against Russia in the long run. Russia likely diluted Ukraine’s leverage by linking energy issues with “peace talks” – a scenario ISW forecasted.[1] The Kremlin avoided reputational and financial losses, and freed resources to focus on the future stages of its campaigns in Ukraine and elsewhere. The West continues to cede the leverage it has with Russia because it compartmentalizes its approach – in this case by approaching an energy issue as distinct from the Kremlin’s larger campaign in Ukraine and Europe more broadly.

Russia faced potential setbacks to its geopolitical influence in Europe and its financial position in late 2019. The contract enabling Russia to sell gas to Europe via Ukraine was set to expire on December 31, 2019.[2] The Kremlin and Ukraine’s government were in deadlocked negotiations regarding the contract’s extension. The Kremlin demanded, among other things, that Ukraine drop all international arbitration claims against Gazprom, Russia’s state-owned gas company, for its previous contract breaches and abusive monopolistic tactics.[3] Ukraine signaled that it was willing to let the contract expire rather than renew it on the Kremlin’s exploitative terms.[4]

The Kremlin had a weakened position in the late 2019 energy negotiations with Ukraine.
  • Ukraine had the ability and willingness to hold out for and demand a fair deal. Ukraine’s state-owned gas company, Naftogaz, entered final negotiations with Gazprom in the fall of 2019 holding, arguably, one of the strongest positions on Russian gas it ever had. Ukraine has diligently worked to reduce its dependence on Russian gas and reform its energy sector over the last five years. Ukraine ceased importing Russian gas for domestic consumption and increased its gas reserves.[5] Naftogaz won $3 billion in arbitration claims against Gazprom and had an additional estimated $20 billion in outstanding claims – a long-term form of leverage that Gazprom insisted Ukraine surrender. Ukraine was also prepared to forgo an unfavorable deal with Russia and manage the fallout. Naftogaz leaders asserted on November 18 that the nullification of Ukraine’s claims against Russia were “not economically feasible.”[6] Ukrainian Prime Minister Oleksiy Honcharuk said on December 10 that Ukraine is ready for a “gas war” with Russia.[7] Naftogaz’s Supervisory Board approved a draft financial plan in December for 2020 predicting revenue losses due to a contract non-renewal.[8]
  • Some European states were preparing contingencies in the event that Russia and Ukraine failed to sign a new deal. Hungary, Poland, and Slovakia confirmed that they were preparing for a potential gas shutoff.[9] Moldova signed an agreement with the European Bank for Reconstruction and Development in December 2019 to finance contingency plans for alternative gas purchases from Ukraine in the event of a shutoff.[10]
  • A halt to Russian gas sales to Europe would have temporarily set back multiple Kremlin campaigns. A gas shutoff would have decreased Russia’s revenues and damaged its reputation by limiting Russia’s reliability in exporting gas to European clients. The Kremlin was vulnerable at the time due to construction delays on the Nord Stream 2 and Turk Stream 2 gas pipelines, which the Kremlin is building to diversify its energy transit options to Europe, deepen its influence within the European Union, and bypass Ukraine’s gas transit system.[11] A gas shutoff would have also challenged Russia’s promise to deliver discounted gas to Moldova – one of the Kremlin’s enticements for the new government in Moldova, where Russia is regaining influence after three years of setbacks.[12]
The Kremlin nevertheless succeeded in securing a new transit contract with Ukraine on December 31. Ukrainian officials reversed their positions and “agreed in principle” to sign a contract on December 19.[13] Russia and Ukraine renewed the contract within the Kremlin-preferred timeframe, and largely on the Kremlin’s terms, on December 31.[14]

The contract provides limited short-term benefits to Ukraine but strips Ukraine of long-term leverage. Russia’s main “concession” was a $3 billion payment to Ukraine in accordance with two rulings from the Arbitration Institute of the Stockholm Chamber of Commerce that Russia previously refused to pay.[15] Ukraine may have been able to recover some or all of this claim via seizures of Gazprom’s assets in Europe, which would have taken time.[16] The new contract also reportedly obliges Gazprom to pay the minimum gas-transit fee even if it does not pump the contracted volumes through Ukraine. Russia likely agreed to the provision because it intends to phase Ukraine out of its transport system in the long run.

Ukraine surrendered long-term leverage as part of the deal, however. Ukraine agreed to nullify its pending claims against Gazprom, at least two of which were worth an estimated $20 billion dollars total.[17] The new contract’s terms decrease volume transport through Ukraine over time, which will result in revenue losses for Ukraine.[18] Gazprom did not discuss the issue of returning Naftogaz’s assets in the Russian-occupied Ukrainian Crimea Peninsula during the contract negotiations.

Ukraine also ceded an opportunity to extract non-energy related concessions from Russian President Vladimir Putin by leveraging its upper hand on gas. Zelensky could likely have leveraged the situation for a better outcome in the Russia-Ukraine talks regarding the Russian-fueled war in Ukraine, including regarding the terms of the December 29 prisoner exchange.[19]

The Kremlin also bought itself time to complete the Nord Stream 2 pipeline and reorient its efforts on other campaigns. The contract with Ukraine buys the Kremlin time to finish constructing the Nord Steam 2 pipeline, which the Kremlin likely intends to use to cut Ukraine out of its gas transit to Europe in the long term. The contract also provides the Kremlin additional financial security, ability to deliver on its energy promises to Europe and to its cultivation targets in the now independent states of the former Soviet Union, like Moldova, as well as bandwidth to focus on the next phases of its campaigns in Ukraine and globally.

The Kremlin used multiple points of leverage to secure the deal. The Kremlin exploited a combination of factors to compel Zelensky to sign the deal. Ukraine’s finances need the steady revenue from Russian gas transit fees and the $3 billion dollar payout from the disputed arbitration claim. Zelensky likely assessed that not renewing the contract would damage support for Ukraine in Europe, notably in Germany and France. Russia also manipulated Ukraine on gas in the “peace talks” surrounding the war in Eastern Ukraine.

Putin has likely exploited the Zelensky government’s need to secure funds to support the Ukrainian economy and foreign debt payment obligations in the short term by including an offer of an immediate cash payment – $3 billion – into the deal. The Kremlin first tried to incentivize Ukraine with lower gas prices. Putin offered Ukraine a 25% discount on gas on November 14, echoing a proposal the Kremlin made to Moldova in September.[20] Putin then switched to a strategy of diluting Ukraine’s leverage by tying in energy talks with “peace talks” in the agenda of the Normandy Format meeting between Russia, Ukraine, France, and Germany on December 8.[21]

Key European countries failed to seize an opportunity to pressure Russia. Europe missed an opportunity to counter Russia’s aggression. In fact, German and French leaders may have encouraged Ukraine to sign the deal to avoid any gas supply disruptions to Europe.[22] The West could have recognized a strategic opportunity to counter Russia and prevent the Kremlin from diluting Ukraine’s leverage on energy. Europe could have provided Ukraine with more room to maneuver – financially and politically. Europe could have also helped Ukraine preserve its long-term leverage and ensure more favorable terms on both energy and talks regarding the conflict in Ukraine. The West continues to miss opportunities to push back on Russia and is ceding leverage in part because the West continues to compartmentalize its approach with regard to Russia. The West must view the Kremlin’s intertwined campaigns and objectives holistically – across theaters and time – in order to respond effectively to Russia’s hybrid warfare.

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[1] Nataliya Bugayova and George Barros, “The Perils of Talks on Russia's War in Ukraine,” The Institute for the Study of War, December 7, 2019, https://iswresearch.blogspot.com/2019/12/the-perils-of-talks-on-russias-war-in.html.
[2] Gazprom offered to extend the existing gas transit contract by one year. The offer came with three demands: Ukraine must drop all mutual claims in international arbitration, the Antimonopoly Committee of Ukraine must annul its fine on Gazprom for alleged abuse of its dominant position, and Naftogaz must withdraw its application to the European Commission to investigate Gazprom. Stuart Elliott, “Gazprom Makes Official Proposal to Ukraine's Naftogaz for 1-Year Gas Transit Deal,” S&P Global, November 18, 2019, https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/111819-gazprom-makes-official-proposal-to-ukraines-naftogaz-for-1-year-gas-transit-deal.
[3] Stuart Elliott, “Gazprom Makes Official Proposal to Ukraine's Naftogaz for 1-Year Gas Transit Deal,” S&P Global, November 18, 2019, https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/111819-gazprom-makes-official-proposal-to-ukraines-naftogaz-for-1-year-gas-transit-deal.
[4] [“Ukraine is Ready for Russian Gas Shutoff,”] Obozrevatel, November 5, 2019, https((:))//www.obozrevatel.com/tv/burchuk1911056-1channel-3-20191105-162135-h264-8-bit-621-mp4.htm ; [“We Are Ready for the Stop of Russian Gas Transportation through the Territory of Ukraine – Orzhel,”] 5 Kanal, November 5, 2019, https((:))//www.5.ua/ru/polytyka/mi-hotovi-k-ostanovke-transportyrovky-rossyiskoho-haza-po-terrytoryy-ukrayni-orzhel-202175.html; [“Refusal of Naftogaz’s Arbitrations Claims against Gazprom is Not Economically Feasible - Top Naftogaz Manager,”] Interfax Ukraine, November 19, 2019, https((:))//interfax.com.ua/news/general/625392.html ; [“Naftogaz Offered Gazprom to Pay Stockholm Debts with Gas,”] Vedomosti, November 25, 2019, https((:))//www.vedomosti.ru/business/articles/2019/11/25/817090-naftogaz.
[5] Ukrainian gas reserves reached a high of 18.9 bcm before December 31. Ukraine consumed 32.3 bcm of gas in 2018 and 31.9 in 2017. “Ukrtransgaz: 13.1 bcm of Gas Injected in Ukraine's USFs in 2019, up 34% from 2018,” Unian, January 3, 2020, https://www(.)unian.info/economics/10818269-ukrtransgaz-13-1-bcm-of-gas-injected-in-ukraine-s-usfs-in-2019-up-34-from-2018.html ; “Ukraine Winter Season Gas Reserves Rise to 18.8 bcm,” Reuters, September 9, 2019, https://www.reuters.com/article/ukraine-gas/ukraine-winter-season-gas-reserves-rise-to-188-bcm-idUSL5N26034Q; “Gas Consumption in Ukraine, 2017-2018,” Naftogaz, January 29, 2019, https://naftogaz-europe((.))com/article/en/gasconsumptioninukraine20172018.
[6] [“Refusal of Naftogaz’s Arbitrations Claims against Gazprom is Not Economically Feasible - Top Naftogaz Manager,”] Interfax Ukraine, November 19, 2019, https((:))//interfax.com.ua/news/general/625392.html.
[7] Oleksiy Honcharuk post December 10, Oleksiy Honcharuk Facebook, December 10, 2019, https://www.facebook.com/PMHoncharuk/photos/a.122337865812800/160313438681909.
[8] “Naftogaz to Lose Hr 13 billion in Net Profit in 2020,” Kyiv Post, December 18, 2019, https://www.kyivpost(.)com/business/naftogaz-to-lose-hr-13-billion-in-net-profit-in-2020.html.
[9] “Hungary and Slovakia are Preparing Together for the Eventuality that Gas Will not be Arriving via Ukraine,” Hungarian Ministry of Foreign Affairs and Trade, April 26, 2019, https://www.kormany(.)hu/en/ministry-of-foreign-affairs-and-trade/news/hungary-and-slovakia-are-preparing-together-for-the-eventuality-that-gas-will-not-be-arriving-via-ukraine; Poland’s PGNiG gas operator confirmed Poland is ready if Gazprom and Naftogaz’s gas transit contract expires on December 11. PGNiG claimed alternative gas suppliers, including Norway, the EU, the United States, and Qatar, could satisfy Poland’s gas demands. “Poland is Ready if Russia Cuts Gas Transit to the EU Across Ukraine this Winter,” BNE Intellinews, December 12, 2019, https://www.intellinews(.)com/poland-is-ready-if-russia-cuts-gas-transit-to-the-eu-across-ukraine-this-winter-173321/?source=ukraine; Slovak Minister of Energy Peter Žiga said the Ministry of Economy considers contract non-renewal “quite possible” and that the ministry is preparing for the consequences on December 11. [“Slovakia is Preparing for a Crisis of Gas Supply from Russia through Ukraine,”] RIA Novosti, November 12, 2019, https://ria(.)ru/20191211/1562279147.html; [“After the New Year, a Gas Crisis is Likely, Minister Ziga Said,”] Konzervatívny Web, December 11, 2019, https://www.konzervativnyweb(.)sk/c/22281197/po-novom-roku-je-plynova-kriza-pravdepodobna-mysli-si-minister-ziga.html; [“Russian Gas from Ukraine is not Likely to Flow. The State is Preparing for a Crisis Scenario,”] Pravda, December 11, 2019, https://spravy.pravda(.)sk/ekonomika/clanok/535742-rusky-plyn-z-ukrajiny-zrejme-nepritecie-stat-chysta-krizovy-scenar/.
[10] Moldova and the European Bank for Reconstruction and Development’s (EBRD) signed an agreement on funding a potential plan for alternative gas supplies on December 11. Moldovan Prime Minister Ion Chicu confirmed the Moldovan government was working on contingency plans in the event of a gas contract non-renewal. Chicu said the agreement will provide Moldova with Ukrainian gas as a backup if Moldova has to find an alternative way to import gas and if Moldovan state-owned gas operator Moldovagaz has insufficient funds to import the gas. “EBRD to Lend Moldova $50 Million for Gas Purchase from Naftogaz,” Kyiv Post, December 12, 2019, https://www.kyivpost(.)com/ukraine-politics/ebrd-to-lend-moldova-50-million-for-gas-purchase-from-naftogaz.html.
[11] The Kremlin failed to reach its goal of having Nord Stream 2 and Turk Stream’s second line operational by January 1, 2020. Gazprom began shipping gas to Turkey via Turk Stream’s first line connecting Russia and Turkey on January 1. Russian President Vladimir Putin and Turkish President Recep Erdogan held an inauguration ceremony for Turk Stream’s first line on January 8. Bulgaria calls Turk Stream’s second line connecting Bulgaria to Serbia and Hungary “Balkan Stream.” Construction on Turk Stream’s “Balkan Stream” Bulgarian line is not complete. Putin accused Bulgaria of deliberately delaying Turk Stream’s Bulgaria line and said Moscow could find ways to bypass Sofia if needed on December 4. Russian Ambassador to Bulgaria Anatoly Makarov said Bulgarian Prime Minister Boyko Borissov pledged Russian gas would go through Bulgaria to Serbia via Turk Stream on May 31, 2020. Vladimir Soldatkin, “Russia's Putin Accuses Bulgaria of Holding up TurkStream Pipeline,” Reuters, December 4, 2019, https://www.reuters.com/article/us-russia-serbia-bulgaria/russias-putin-accuses-bulgaria-of-holding-up-turkstream-pipeline-idUSKBN1Y82HW; Tsvetelia Tsolova and Vladimir Soldatkin, “Russia Says Bulgaria to Complete Pipeline Stretch of TurkStream by 2020,” Reuters, October 21, 2019, https://www.reuters.com/article/us-bulgaria-gas-turkstream/russia-says-bulgaria-to-complete-pipeline-stretch-of-turkstream-by-2020-idUSKBN1X01F8; “Balkan Stream Ready to Receive Gas from TurkStream Starting January 1,” TASS, December 9, 2019, https://tass(.)com/economy/1097089; Zeeshan Aziz, “Borissov Pledged Russian Gas Transit To Serbia May 31, 2020 - Russian Ambassador,” UrduPoint, December 12, 2019, https://www.urdupoint(.)com/en/business/borissov-pledged-russian-gas-transit-to-serbi-785755.html.
[12] Russia’s logistical methods for gas export to Moldova are limited without Ukrainian gas transit infrastructure. Nataliya Bugayova and George Barros, “The Perils of Talks on Russia's War in Ukraine,” The Institute for the Study of War, December 7, 2019, https://iswresearch.blogspot.com/2019/12/the-perils-of-talks-on-russias-war-in.html.
[13] Stuart Elliott, “Russia, Ukraine Agree 'In Principle' New Gas Transit Deal: EC,” S&P Global, December 19, 2019, https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/121919-russia-ukraine-agree-in-principle-new-gas-transit-deal-ec; “Ukraine and Russia Reach 'Agreement in Principle' on Gas Transit,” Hromadske, December 20, 2019, https://en.hromadske(.)ua/posts/ukraine-and-russia-reach-agreement-in-principle-on-gas-transit.
[14] Gazprom paid Ukraine the $3 billion dollars from the Stockholm arbitration case on December 27 to get Ukraine to agree to a new five-year contract. Under the new contract, the minimum guaranteed volumes of gas transit are 65 billion cubic meters for 2020 and 40 billion cubic meters per year from 2021 to 2024, subject to a competitive tariff. The old gas transit contract stipulated that Gazprom was guaranteed to supply 60 billion cubic meters a year to Europe via Ukraine, with the potential to increase up to 90 billion. The new contract stipulates Ukraine agreed to withdraw from all other arbitration proceedings where final decisions had not yet been rendered and retract its claims on Gazprom assets in Europe. Under these provisions, Ukraine nullified at least two major claims: a $7.4 billion Antimonopoly Committee of Ukraine claim and a $12.25 billion Stockholm arbitration lawsuit. The sums of these claims would have likely grown over time due to accrued interest. The new contract brought Ukraine into accordance with European gas rules and subjected Gazprom to the “ship or pay” principle. Under European gas rules’ “ship or pay” / “pump or pay” principle, a gas buyer must pay for the contracted transportation capacity regardless of the volume of actually transported gas. “Benefits of ‘Pump or Pay’ Principle: Ukrainian GTS Operator Reports on Russian Gas Transit Volumes,” Unian, January 3, 2020, https://www.unian(.)info/economics/10818437-benefits-of-pump-or-pay-principle-ukrainian-gts-operator-reports-on-russian-gas-transit-volumes.html; “Gazprom Pays Ukraine for Twice the Volume of Gas Pumped,” Unian, January 24, 2020, https://www.unian(.)info/economics/10844663-gazprom-pays-ukraine-for-twice-the-volume-of-gas-pumped.html; “Naftogaz, GTSOU and Gazprom Signed a Set of Agreements to Ensure Russian Gas Transit over the Next Five Years,” Naftogaz, December 31, 2019, http://www.naftogaz(.)com/www/3/nakweben.nsf/0/24DE3C1B1D52B136C22584E00079DA9E?OpenDocument&year=2019&month=12&nt=News&; Stuart Elliott, “Russia-Ukraine Legal Dispute Intensifies with New $12 Billion Lawsuit,” S&P Global, November 5, 2019, https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/110519-russia-ukraine-legal-dispute-intensifies-with-new-12-billion-lawsuit; “Details Emerge of Ukraine-Russia Gas Transit Agreement,” Hromadske, December 21, 2019, https://en.hromadske(.)ua/posts/details-emerge-of-ukraine-russia-gas-transit-agreement; Oleksiy Honcharuk post December 27, Oleksiy Honcharuk Facebook, December 27, 2019, https://www.facebook.com/PMHoncharuk/posts/167104661336120; Naftogaz of Ukraine post December 27, Naftogaz of Ukraine Facebook, December 27, 2019, https://www.facebook.com/NaftogazUA/posts/2730163320396769.
[15] Stockholm ruled in favor of Naftogaz in two cases against Gazprom for Gazprom’s breaches of contract in failure to deliver agreed volumes of gas in December 2017 and February 2018. “Ukraine's Naftogaz Claims $2.56 Billion Victory in Gazprom Legal Battle,” Reuters, February 28, 2018, https://www.reuters.com/article/us-ukraine-crisis-russia-gazprom/ukraines-naftogaz-claims-2-56-billion-victory-in-gazprom-legal-battle-idUSKCN1GC2Z8.
[16] Ukraine began seizing Gazprom’s assets in the U.K., Netherlands, and Switzerland in March 2018 for non-compliance with the decision of the $3 billion Stockholm arbitration court ruling. Naftogaz claimed Dutch and Swiss courts supported Naftogaz’s petition to seize Gazprom’s assets in relation to the $3 billion Stockholm Arbitration case in June 2018. Gazprom challenged these cases in court and refused to cooperate with court rulings in Switzerland and the Netherlands. Gazprom claimed Switzerland’s Zug Canton court repealed its May 29 ruling on asset seizure in January 2019. Naftogaz claimed the Zug Canton court’s repeal decision regarding Gazprom’s assets seizure was due to technical jurisdiction issues, not the principles of the dispute on January 20. Naftogaz also claimed Gazprom refused to comply with Dutch and Swiss court orders. London’s Commercial Court issued a freezing order in respect of Gazprom’s assets in England and Wales on June 19, 2018. Gazprom provided Naftogaz a list of all its assets valued greater than $50,000 to comply with the order after the Russian Energy Ministry gave Gazprom permission. Gazprom confirmed Naftogaz lifted its foreign asset freeze against Gazprom assets in the U.K. Luxembourg, and Switzerland on January 20. Naftogaz justified the decision to back off asset seizures after Gazprom paid the $3 billion. “Ukraine Begins Seizure of Russian Energy Giant Gazprom's Assets, Citing Stockholm Court Decision,” RT, March 7, 2018, https://www.rt(.)com/business/420738-ukraine-gazprom-assets-arrests-court/; “Court Attached Gazprom’s Dutch Assets to Secure USD 2.6 Billion Settlement with Naftogaz,” Naftogaz, June 5, 2018, http://www.naftogaz(.)com/www/3/nakweben.nsf/0/17FF04A21360A139C22582A30021F2F; “Swiss Court Overturns Arrest of Russia’s Gazprom Assets Which Ukraine Claims Were Seized,” RT, January 18, 2019, https://www.rt(.)com/business/449107-gazprom-naftogaz-swiss-court/; “Swiss Court Confirms Validity and Enforceability of Transit Award. Gazprom Conceals its Swiss Assets,” Naftogaz, January 18, 2019, http://www.naftogaz(.)com/www/3/nakweben.nsf/0/655E11DDC8F27340C2258386005206C2?OpenDocument&year=2019&month=01&nt=News&; “Court freezes Gazprom Dutch Assets to Enforce Stockholm Arbitration Order to Pay $2.6 Bln,” Interfax Ukraine, June 5, 2018, https://en.interfax(.)com.ua/news/economic/509836.html; “Naftogaz says British court grants Gazprom asset freeze in UK,” Reuters, June 19, 2018, https://uk.reuters.com/article/uk-ukraine-naftogaz-gazprom/naftogaz-says-british-court-grants-gazprom-asset-freeze-in-uk-idUKKBN1JF1U7; “Russia's Gazprom Discloses Information on its Assets in Great Britain,” UAWIRE, July 6, 2018, https://uawire(.)org/gazprom-disclosed-information-on-its-assets-in-great-britain; “Gazprom Says Foreign Asset Freeze Lifted,” Reuters, January 20, 2020, https://www.reuters.com/article/us-russia-ukraine-gas/gazprom-says-foreign-asset-freeze-lifted-idUSKBN1ZJ1XL.
[17] Ukraine nullified at least two major claims: a $7.4 billion Antimonopoly Committee of Ukraine claim and a $12.25 billion Stockholm arbitration lawsuit. Stuart Elliott, “Russia-Ukraine Legal Dispute Intensifies with New $12 Billion Lawsuit,” S&P Global, November 5, 2019, https://www.spglobal.com/platts/en/market-insights/latest-news/natural-gas/110519-russia-ukraine-legal-dispute-intensifies-with-new-12-billion-lawsuit; “Details Emerge of Ukraine-Russia Gas Transit Agreement,” Hromadske, December 21, 2019, https://en.hromadske(.)ua/posts/details-emerge-of-ukraine-russia-gas-transit-agreement.
[18] Under the new contract, the minimum guaranteed volumes of gas transit are 65 billion cubic meters for 2020 and 40 billion cubic meters per year from 2021 to 2024, subject to a competitive tariff. The old gas transit contract stipulates that Gazprom was guaranteed to supply 60 billion cubic meters a year to Europe via Ukraine, with the potential to increase up to 90 billion. “Details Emerge of Ukraine-Russia Gas Transit Agreement,” Hromadske, December 21, 2019, https://en.hromadske(.)ua/posts/details-emerge-of-ukraine-russia-gas-transit-agreement; “Naftogaz, GTSOU and Gazprom Signed a Set of Agreements to Ensure Russian Gas Transit over the Next Five Years,” Naftogaz, December 31, 2019, http://www.naftogaz(.)com/www/3/nakweben.nsf/0/24DE3C1B1D52B136C22584E00079DA9E?OpenDocument&year=2019&month=12&nt=News&.
[19] Russia and Ukraine completed a prisoner exchange on December 29. Ukraine returned Russian nationals, as well as five members of the disbanded Berkut security service who are suspected participants in the crackdown and killing of demonstrators at the Euromaidan protests of 2014. Zelensky faced pushback from civil society, but defended the exchange of the five Berkut members, saying it was the Kremlin’s condition for the exchange. Zelensky might have been able to use Ukraine’s upper hand on energy to extract concession from Putin on a number of non-energy related issues, such as prisoner swap or other issues. Tony Wesolowsky, “Price To Pay: Release Of Former Ukrainian Riot Police In Prisoner Swap Sparks Anguish, Debate,” Radio Free Europe / Radio Liberty, December 30, 2019, https://www.rferl.org/a/release-of-former-ukrainian-riot-police-in-prisoner-swap-sparks-anguish-debate/30352826.html; Oleg Sukhov and Jostyantyn Chernichkin, “Court Releases Former Berkut Officers Charged with EuroMaidan Killings,” Kyiv Post, December 28, 2019, https://www.kyivpost(.)com/ukraine-politics/court-releases-berkut-prisoners-charged-with-euromaidan-killings.html.
[20] [“Putin Spoke about the Risks of Stopping Gas Transit through Ukraine,”] TASS, November 14, 2019, https://tass(.)ru/ekonomika/7122979; [“Russia is Ready to Reduce Gas Price for Ukraine by 25%, - Putin,”] Zik, November 15, 2019, https://zik(.)ua/news/2019/11/15/rosiia_hotova_znyzyty_tsinu_hazu_dlia_ukrainy_na_25__putin_944918; “Putin: Ukrainian Industry Could Be Offered 25% Lower Gas Prices,” Russia Business Today, December 10, 2019, https://russiabusinesstoday(.)com/energy/putin-ukrainian-industry-could-be-offered-25-lower-gas-prices/; “Gas Prices for Consumers in Ukraine May be 25% Lower — Putin,” TASS, December 9, 2019, https://tass(.)com/economy/1097573; The Kremlin said starting on January 1, 2020, Moldova would receive Russian gas at $173 per thousand cubic meters- as of January 1, 2019, the price was $235. “Russia to Sell Gas to Moldova at Price of $173 in 2020,” TASS, November 20, 2019, https://tass(.)com/economy/1091231; “Moldovan President: Russia has Provided a Gas Discount for Moldova,” UAWIRE, September 10, 2019, https://www.uawire(.)org/moldovan-president-russia-has-provided-a-gas-discount-for-moldova.
[21] Nataliya Bugayova and George Barros, “The Perils of Talks on Russia's War in Ukraine,” The Institute for the Study of War, December 7, 2019, https://iswresearch.blogspot.com/2019/12/the-perils-of-talks-on-russias-war-in.html.
[22] Zelensky said a gas transit deal with Russia looks more likely after meeting with Putin, Merkel, and Macron in Paris. Zelenskiy said Ukraine has “more chances to sign [a contract] with better conditions that had previously been discussed,” on December 10. https://tsn(.)ua/ru/groshi/a-u-nas-v-kvartire-gaz-a-u-vas-putin-i-zelenskiy-rasskazali-o-rezultatah-gazovyh-peregovorov-1457037.html ; https://www.rbc(.)ru/rbcfreenews/5deede4c9a79477f95780d6d.