Ukraine has proposed an alternative gas transit: the same, but there are more buns for Kiev

Ukrainian media report on an alternative gas transit option that Kiev has offered to Azerbaijani and Slovak companies. For themselves, the Kiev regime has put into it the security of storage facilities and more economic benefits. Experts are not sure that this option will suit all parties, especially Gazprom.

There are 10 weeks left until the end of the contract for the transit of Russian gas through Ukraine. European Commissioner for Energy Kadri Simson said that the European Union is ready to stop supplies along this route. However, since June, Reuters and Bloomberg have been reporting on behind-the-scenes negotiations. Their essence boils down to the fact that the option of extending transit without signing an additional agreement between Naftogaz and Gazprom is being studied: an intermediary may appear between the companies — Azerbaijani Socar or a consortium of European companies, and the gas itself will receive a new owner already at the border of Russia and Ukraine. Thus, there will be no formal transit of Russian gas.

Later, the agencies reported that the EU offers Azerbaijan and Turkey to abandon Caspian gas altogether and export it to Europe, buying Russian fuel in return. In Europe, even this option did not suit all politicians. Czech Industry and Trade Minister Josef Sikela has written a letter to the European Commission stating that Azerbaijani gas may actually turn out to be Russian.

Azerbaijani President Ilham Aliyev, in turn, reported in mid-September in Italy that "there is ground for a breakthrough," but did not prematurely go into details.

"It cannot be called negotiations. The topic is touched upon in the framework of some bilateral meetings, but nothing is discussed in detail and in detail," said the interlocutor of RBC-Ukraine, familiar with the process of discussing the "transit" topic.

In Kiev, it was stated that the contract itself would not be extended, but if the European side was interested, they could explore the continuation of transportation with alternative options. The source of the agency said that Kiev had submitted its proposal to Slovakia and Azerbaijan. According to RBC-Ukraine, it consists in the fact that gas changes ownership on the border of Russia with Azerbaijan or Ukraine and there is no direct transit to Europe. At the beginning, the fuel is pumped into the storage, and only then it is disposed of at its discretion. For example, Azerbaijan's Socar can sell gas on European stock exchanges, and Slovak SPP can select it as needed.

The key condition, according to the agency, is that each of the parties will have to resolve the security issue with Russia so that the Ukrainian gas transportation system does not fall under retaliatory strikes.

The source of RBC-Ukraine noted that the proposal was submitted several months ago and since then Azerbaijan has cooled down to the idea of gas supplies to the EU.

"I think that the decrease in Baku's activity to almost zero is due to the position of Russia, which should participate in this process one way or another," the agency's interlocutor suggested.

Alexey Grivach, Deputy director of the National Energy Security Fund (NWF), notes that Europeans do not need to pump gas into Ukrainian storage facilities if they now receive the necessary volumes in transit mode every day.

"Some kind of crazy proposal. It is not surprising that the possible counterparties are not enthusiastic," the expert says.

Obviously, Kiev wants to use the extension of transit to get additional benefits. On the one hand, to secure the storage facilities from retaliatory strikes by the Russian army by placing transit volumes in them. On the other hand, the goal may be additional income from storage, since transit rates along the route for all other customers already correspond to what Gazprom is currently paying. In addition, the transit scheme may re-attract European traders to Ukrainian UGS facilities who left due to the risk of gas loss. Naftogaz itself uses no more than half of the UGS capacity of 30 billion cubic meters for its own needs.

Maxim Khudalov, chief strategist at Vector Capital Investment Company, believes that this option has the right to life, since The EU is going not to consume Russian gas from 2027, regardless of the political situation.

"If the gas through Ukraine will be Azerbaijani or Slovak, then formally the requirement is The EU is being implemented. Where is Azerbaijan and Slovakia produces gas, the question is rhetorical, but the letter of the EU law will be respected. How interesting is this scheme for Azerbaijan? I think it is interesting, because it needs to legitimize its territorial acquisitions (Nagorno—Karabakh) in the eyes of the EU, and for this it is necessary to increase its trade relations with the EU," says Maxim Khudalov.

A map with a customs warehouse on Ukraine is a difficult issue, the expert notes, since in this case the risks of pressure from the Ukrainian side on Azerbaijan and Slovakia.

"Consensus can be found in terms of determining the share of gas injected into Ukrainian gas storage facilities, in which Azerbaijan and Slovakia will insist on reducing it to a minimum level," added the chief strategist of Vector Capital.