Hungary, Slovakia Close to Agreement with Azerbaijan on Gas Transit via Ukraine, Bloomberg

The agreement on the transit of Russian gas through Ukraine expires at the end of the year.

European buyers are close to a deal with Azerbaijan to supply natural gas to the continent after a transit agreement between Russia and Ukraine expires at the end of the year.

According to Bloomberg, companies from Hungary and Slovakia are close to signing a contract to supply 12-14 billion cubic meters of gas per year from Azerbaijan. In doing so, they will use the same pipeline network that currently transports Russian gas through Ukraine to the European Union.

It is noted that these supplies will effectively replace the supplies that Europe currently receives under the transit agreement. The contract will have to include a so-called swap agreement between Azerbaijan and Russia, since Azerbaijan does not have enough export capacity to replace existing supplies.

“The deal, which has not yet been finalized, could help contain prices. However, the European Commission has previously said that the region’s energy security would not be at risk after the transit agreement ends. Slovakia and Austria are among the European countries that continue to import Russian gas via the pipeline,” the article says.

Under the commercial agreement, Azerbaijan’s state energy company Socar will supply gas to Sudzha on the Russian-Ukrainian border. Hungary’s MVM Zrt. and Slovakia’s Slovensky Plynarensky Priemysel AS will then take over and deliver it to Europe.

Journalists note that any commercial agreement would require political support from the Ukrainian authorities to allow the country’s gas grid operator to book capacity.

Austrian company OMV AG said it had diversified its supply contracts and could continue to supply fuel to its customers even if gas supplies from Russia were to be stopped. The journalists added:

“The deal will mean Ukraine will continue to receive transit fees for using its pipeline network, which have earned the country about $800 million a year. For Azerbaijan, the agreement strengthens energy ties with Europe. The Caspian Sea nation already supplies gas to eight countries on the continent via a pipeline running through Turkey.”

Sale of Russian gas to Europe

Before the war, Gazprom supplied Europe with more than a third of its gas, but the region has since moved to diversify supplies. The EU now relies more on other sources, including Norway, North Africa, Azerbaijan and liquefied natural gas from the global market.

Russian leader Vladimir Putin hinted that there might be no transit of Russian gas through Ukraine in 2025. In particular, he stated that it was necessary to start booking capacities for gas supplies from Russia through Ukraine in 2025 already in July, so the deadline has already been missed.

(C)UNIAN 2024