Russian state gas giant declines to buy extra transit capacity in Ukraine's Soviet-era network as Nord Stream 2 nears completion

Russian-state owned energy firm Gazprom has reportedly decided not to purchase the rights to move additional gas supplies through Ukraine, on top of its normal exports, for August, as a debate rages over Kiev's transit revenues.

Hungarian trade platform RBP reported on Tuesday that the company had not begun the process of buying extra capacity for next month, planning to move only 63.7 million cubic meters per day. For July, Gazprom had paid for an additional 15 million cubic meters in order to boost its outflows to Western Europe.

At the end of 2019, the energy conglomerate signed a deal with Kiev that will see it pay for a minimum of 40 billion cubic liters to move through Ukraine each year for the following five years. The country made an estimated $7 billion from the agreement for allowing Russian gas to transit through the Soviet-built network of overground pipes.

However, a number of Ukrainian politicians have claimed that the new Nord Stream 2 pipeline poses a threat to the future of that arrangement, with President Volodymyr Zelensky warning that Moscow could shut off the flow and use the nearly completed Baltic Sea link instead to deliver gas directly to Germany. "Nord Stream 2 will disconnect Ukraine from gas supplies, which means 'disconnecting' us from at least $3 billion a year," he said. Zelensky has claimed this will profoundly impact Kiev's budget, and the country "will have nothing to pay for the Ukrainian Army."

Dmitry Birichevsky, the director of economic cooperation at the country's Foreign Ministry, however, told journalists earlier this year that fears Russia could turn off the tap on supplies to its neighbor were unfounded. "We have no plan to suspend gas supplies through Ukraine," he said, insisting that "Russia has never used energy or natural resources as a tool of pressure or blackmail."

A new deal between Washington and Berlin, published last week, saw the US offer to drop sanctions against the final stages of Nord Stream 2’s construction, in exchange for Germany committing to invest in Ukraine and use all available leverage to maintain Kiev's supposed "right" to transit fees.

In addition, "should Russia attempt to use energy as a weapon or commit further aggressive acts against Ukraine, Germany will take action at the national level and press for effective measures at the European level, including sanctions to limit Russian export capabilities to Europe in the energy sector," an unnamed US State Department official told reporters on Thursday.

Moscow's ambassador to the US, Anatoly Antonov, however, lashed out at the putative agreement, saying it is based on "misunderstandings and political attacks on Russia." According to the envoy, the "hostile tone" of the deal "fundamentally contradicts the spirit of the meeting between the two presidents last month in Geneva."

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