A month after it invaded Ukraine, Russia is shipping more natural gas through Ukraine than before the start of the war. It still pays Ukraine in full and in foreign currencies for the gas transit services.
Yury Vitrenko, the CEO of Ukraine’s largest state-owned oil and gas company, Naftogaz told Bloomberg TV in Tuesday that Ukraine will continue shipping Russian gas through its pipelines to Europe “as long as it’s technically possible.” He added that Russian forces were taking care not to damage the gas transit infrastructure in Ukraine.
The Ukrainian gas pipeline network is one of the routes that Russian energy giant Gazprom uses to deliver natural gas to its European customers, who at the moment receive 40% of the gas they need from Russia.
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Under the contract for 2020-24, Gazprom ships 40 billion cubic meters of natural gas a year through the Ukrainian transit infrastructure. Last year, the transit amounted to 41.66 billion cubic meters. According to earlier reports, Gazprom pays Ukraine roughly $2 billion per year for its transit services.
On Wednesday, Russian President Vladmir Putin ordered the Russian Central Bank to develop modalities for “unfriendly” nations to pay for Russian gas in the Russian currency; ruble.
According to Vitrenko, Russian companies that are not subject to restrictions can use their accounts in the West despite the sanctions, can receive money from oil and gas sales, and pay Ukraine for transit. The Naftogaz CEO called on Europe and its allies to put Moscow’s revenues for energy flows in an escrow account until the Russian troops withdraw.
Daily gas flows from Russia at some point surged more than 50% from January lows, with shipments traveling through Ukrainian pipelines more than doubling as energy companies rushed to buy after the invasion.
It’s an awkward situation for European policy makers, which have imposed several rounds of sanctions on Moscow to try to starve President Vladimir Putin’s government of the cash it needs to fund the invasion. The increase also comes as European governments pledge to wean themselves off Russian gas, with plans to keep nuclear and coal plants open for longer and import more liquefied natural gas from countries including the U.S. and Qatar.
On Monday, Investogist reported that Germany had seals a gas deal with Qatar, in an effort to diversify it energy sources away from Russia.
Russian gas flows to Europe soared to the highest level since December in the 48 hours after the war began. State-run exporter Gazprom PJSC said supplies increased due to more orders from European customers, and for some time, shipments through another major Russian pipeline crossing Belarus and Poland and ending in Germany resumed after a two-month halt.
The EU has imposed several rounds of sanctions on Russia to try to cut off the cash flow to the government and force it to abandon its military operation in Ukraine. The bloc also pledged to reduce its dependency on Russian gas by two-thirds this year and to wean itself off completely before 2030.
The natural gas transmission system of Ukraine is a complex of natural gas transmission pipelines for gas import and transit in Ukraine. It is one of the largest gas transmission systems in the world. The system is linked with natural gas transmission systems of Russia and Belarus on one hand, and with systems of Poland, Romania, Moldova, Hungary and Slovakia on the other hand. The system is owned by Government of Ukraine and operated by Ukrtransgaz.
Ukrtransgaz is a subsidiary of Naftogaz. As of 2009, the company had 38,200 km of high pressure gas transit pipelines and more than 30 billion cubic meters of gas storage capacity.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur
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