Today, Brussels hosted Ukraine-EC-Russia negotiations on gas transit through Ukraine after 2019 when the current transit contract between Naftogaz and Gazprom expires.

The parties communicated their positions regarding transit options for Russian gas. Commenting on the proposal of the Russian side to extend the current contracts, Naftogaz CEO Andriy Kobolyev said that the Ukrainian side was ready to consider future contracts if they fully complied with European energy legislation implemented in Ukraine. According to him, only a contract based on European principles would fully secure Ukraine’s interests and prevent Russia from non-market and non-competitive actions it had repeatedly demonstrated in the past.

This position was shared by the European Commission whose representatives acclaimed Ukraine’s material progress in the implementation of European legislation in its domestic gas market.

Andriy Kobolyev expressed confidence that negotiations on future contracts with Gazprom in no way prevent the implementation of the Stockholm arbitration awards and encouraged Gazprom to fully comply with them.

The Commission also noted the validity of the previous arbitration rulings as well as Naftogaz’ right to initiate further claims.

The Commission prepared and tabled its proposal regarding the framework for Russian gas transit through Ukraine after 2019.

According to the proposal, the new gas transit contract should be long-term, i.e. 10 or more years, and provide for transit volumes that would be economically viable for a high-profile European investor. In his comments to media, Maroš Šefčovič explained that the contract should include transit volumes “usually delivered through Ukraine’s GTS”.

The European side also emphasized that the contract should be concluded according to European legislation implemented in Ukraine, which includes standard interconnection agreements between the Ukrainian TSO and those of all neighboring countries.

Ukrainian and Russian sides agreed to take time to consider the proposal thoroughly. The discussion will resume during the next meeting, which is expected this spring.

“We would like to thank the Commission and Mr Šefčovič personally for their comprehensive proposal. I’m pleased that we share the vision of how European rules and procedures should be applied to the new contract. The Commission’s proposal will be a starting point for further negotiations on the transit contract. We are going to study it closely and discuss with our shareholder. Considering the context and our previous experience with Gazprom, we see significant risks to those negotiations. Nevertheless, we hope that active mediation by the Commission will help us design a contract based on transparent European rules,” said Andriy Kobolyev.