How Nord Stream 2 and the Rise in Gas Tariffs in Ukraine are Connected
The amount is large, but not overwhelming for Western countries. The problem is that as soon as Russia starts deliveries via Nord Stream 2, gas tariffs in Ukraine will start to rise. Until 2025, not very much, since Moscow and Kiev are bound by an agreement on pumping gas to Europe. After that, a very significant growth is possible. We are talking about $ 4-5 billion a year. The European Union and the United States will also have to compensate for them, unless Ukraine renews the agreement on direct gas supplies from our country. But in the latter case, this will mean the collapse of Ukraine’s European integration policy and its return to Russia’s sphere of influence.
Now Ukraine receives gas as a result of virtual re-export. Simply put, it takes Russian gas from a pipeline on its territory, but pays for it to Poland, Slovenia or another country that is already paying Gazprom. Until 2021, the scheme was beneficial for Kiev. The exchange quotes were lower than the prices for gas pegged to oil, and there were no pumping costs, since it was taken from the territory of Ukraine.
Everything was spoiled by the rise in exchange prices for gas this year. Tariffs for “blue fuel” for the population this year in Ukraine have doubled. And this despite the fact that the re-export of Russian gas to the country remained virtual. If Russia stops using the capacity of the gas transmission system (GTS) of Ukraine, then Kiev will have to buy gas also with delivery.
If Ukraine continues to buy gas from European traders, the price will rise, at least by the cost of delivery from the European hub, where the purchase will take place, said Aleksey Grivach, deputy head of the National Energy Security Fund. He clarified that at today’s record prices this is a small increase, but under normal market conditions it will be sensitive.
According to Denis Badyanov, analyst at Alfa Capital, if the re-export of Russian gas and supplies from other countries stops, prices for Ukrainian consumers may rise by another 5-15%.
Undoubtedly, Kiev also understands this. It is no coincidence that negotiations are underway with producers of liquefied natural gas (LNG) on the possibility of supplies to Ukraine. It is clear that LNG from the US cannot be cheap due to the distance. But Kiev is trying to negotiate with Qatar and forge links with potential future LNG sellers in the Middle East. The problem is that Ukraine does not have LNG regasification points, that is, LNG reception in its ports. We will have to supply LNG to other countries of Southern Europe, convert it from a liquid to a gaseous state, and only then drive it to the east. The price will be appropriate. According to Grivach, LNG supplies are possible through Poland or Croatia, but it will be very expensive.
As a result, we are not fighting for the preservation of transit through Ukraine, although it has its own peculiarities – the country’s GTS will simply die without Russian gas, but an attempt to prevent further growth of tariffs for the population and business on vital energy resources in a country whose economy is not going through anyway. better times.
