European buyers are nearing a commercial agreement with Azerbaijan to keep natural gas flowing to the continent after a transit deal between Russia and Ukraine expires at the end of the year,
Bloomberg reports.
The Hungarian company MVM and the Slovak company Slovensky Plynarensky Priemysel are close to signing a contract for as much as 12-14 billion cubic meters of gas a year from Azerbaijan, according to people with knowledge of the matter. It would use the same pipeline network that now carries Russian gas across Ukraine to the European Union.
Instead of gas from the Russian gas giant Gazprom, with which Ukraine does not intend to extend the transit deal ends in December, Azerbaijani gas will flow through the aforesaid pipeline. The Azerbaijani state-owned company SOCAR will deliver it to the gas meter in Sudzha - now this border town of Russia’s Kursk Region is under the control of the armed forces of Ukraine - and there it will be transferred to the Hungarian and Slovak companies, which will deliver it to their countries.
But a political decision from Kyiv will be required for this trade agreement to enter into force, as the operator of the Ukrainian gas transportation system must maintain transit capacity. It is also necessary to sign an exchange agreement between Russia and Azerbaijan, as the latter does not have sufficient export capacity to replace current supplies.
If contracts are signed to replace the Russian natural gas with the Azerbaijani one, Ukraine will continue to receive payments - which amounted to $800 million annually in recent years - for the transit of gas through its territory.
Serbia also plans to partially replace the Russian natural gas with the Azerbaijani one. As its president Aleksandar Vucic said in an interview with Bloomberg, next week he will discuss with Azerbaijani leader Ilham Aliyev what volumes SOCAR can provide. After that, Vucic shall negotiate a new contract with Russia, as the current one expires in 2025. It won't be easy, he admitted, but after the talks in Baku, they will figure out what to do with it.
