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“No More Transit Risk”: Ukraine & Russia Ink Landmark Gas Transit Deal, Hammering European Gas Prices

“No More Transit Risk”: Ukraine & Russia Ink Landmark Gas Transit Deal, Hammering European Gas Prices

Ukrainian President Volodymyr Zelensky has hailed the completion of an against all odds landmark deal with Russia’s Gazprom as ensuring “energy security and prosperity for Ukrainians.” 

It will keep natural gas flowing to Western Europe via Ukraine for the next five years, which is estimated to net Ukraine $7 billion (€6.25 billion) in gas transit fees by 2024

After a series of compromise breakthroughs over the past weeks, including Gazprom paying out $2.9 billion legal settlement to Naftogaz and Kiev in turn agreeing to wave a separate legal claim, the two sides finally inked the historic deal on Monday, which signals a broader thawing in tensions and dramatic deescalation after Moscow and Kiev have for years stood on the brink of open war. 

Per Gazprom Chairman Alexey Miller, the accord has already gone into effect as of Tuesday: “After five days of uninterrupted negotiations in Vienna, definitive decisions have been made and final deals have been reached,” he said in a statement.

And Zelenskiy further presented it as an ‘everyone wins’ breakthrough: “Europe knows that we will not fail when it comes to energy security,” he said. Indeed European gas markets immediately felt the effects:

European gas and power prices extended declines after a last-gasp accord between Russia and Ukraine on natural gas flows averted a winter supply crisis.

According to Bloomberg’s analysis:

“There’s no more transit risk,” said Thierry Bros, an associate at Harvard University’s Davis Center for Russian & Eurasian Studies. “We are in a world with a lot of LNG and piped gas and the Russians want to keep their market share in Europe.”

Benchmark Dutch gas prices dropped 0.7%, taking their record annual plunge to 44%. German power traded at its lowest level since May 2018.

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