Ukrainian Talks Continue on Transit of Azeri Gas, No Deal Yet

(Bloomberg) -- Ukraine is in talks about supplying Azeri gas to Europe through its network of gas pipelines but hasn’t yet reached an agreement.

Kyiv and Moscow are both willing to find a solution that could involve a supply swap with Azerbaijan but Ukraine wants to prevent Russian gas being shipped to EU countries, according people familiar with the talks speaking on condition of anonymity. Some gas sold as Azeri could originate in Russia, one of the people acknowledged.

Gas prices fell as much as 9.1% after an earlier media report about a possible deal. Talks are still continuing on keeping gas flowing through Ukraine to Europe once a pact with Russia expires at the end of the year, the people said.

The transit deal ending has been seen all but inevitable amid the Kremlin’s war in Ukraine. Europe has tried to wean itself off Russian gas but several eastern states continue to receive it through a pipeline that crosses Ukraine. That agreement ends this year, potentially cutting off countries such as Austria and Slovakia from about 15 billion cubic meters of supply.

Some European government and company officials have in recent months been seeking ways to keep the gas flowing, including via alternative schemes, such as buying and injecting gas from Azerbaijan.

Ukraine’s President Volodymyr Zelenskiy in July said a deal to replace Russian gas with Azeri supplies was “one of the proposals” currently being discussed to keep Ukraine’s pipelines full. However, Azerbaijan’s gas production is insufficient as a full substitute for the Russian flow. That means a swap using Russian gas is an option.

For Russia’s part, President Vladimir Putin said he’s ready to keep supplying gas to Europe but has alternative export routes via Turkey if a deal can’t be found. 

©2024 Bloomberg L.P.