Azerbaijani gas through Ukraine: a hidden Russian scheme

Unfortunately, even after almost 11 years of war with Russia, which actually began in 2014, Russian gas is still being transported to Europe through Ukraine. At the end of 2024, the 5-year contract signed in 2019 between Naftogaz and Gazprom expires. The Ukrainian GTS transports 14 billion cubic meters of gas to Europe.  Over the two years of the full-scale war, European consumers have replenished the budget of the Russian war against Ukraine by purchasing Russian gas for a total of €88.8 bn. After this contract is completed, a new threat arises — the supply of gas through Ukraine under the guise of Azerbaijani gas, which may actually be Russian.  As it became known, on August 19, 2024, the State Oil Company of Azerbaijan (SOCAR) and Gazprom reached an agreement to expand their partnership. Such a scenario could allow Russia to maintain its influence on the European gas market, while also undermining efforts to achieve energy independence and security for Ukraine and Europe.

Throughout the entire period of the transit agreement, Ukraine has remained a reliable transit country for European countries, always complying with the terms of the contract, ensuring stable supplies of Russian gas to the European Union, despite the fact that we as a country do not receive a significant portion of transit revenues. Since 2014, Ukraine has repeatedly appealed to its European partners to stop or significantly reduce the volume of Russian pipeline gas to the European market.

It is important to note that before the full-scale invasion in 2022, according to the EU, the share of Russian pipeline gas in the European market was over 44%. Despite its significant dependence on Russian gas, the European Union has taken decisive steps in a short time to significantly reduce its dependence on Russian energy resources. Thus, in the spring of 2022, the European Union made a strategic decision to completely abandon the consumption of Russian gas by 2027. As a result of the rapid actions of European countries to abandon Russian gas, Gazprom began to suffer significant financial losses and in 2023 the company recorded a loss of $7 billion, while the company's production fell by 25%.  Gazprom's return to the European gas market has become a matter not only of the company's financial stability, but also of the survival of one of the Kremlin regime's main breadwinners.

The final of a 5-year contract. Quo Vadis?

Thus, the transit contract expires at the end of 2024, and this creates historic opportunities for both Ukraine and the EU to take decisive steps toward achieving their strategic goal of energy independence from the aggressor country.

As European Commissioner for Energy Kadri Simson noted in her recent speech, "We have no interest to prolong the trilateral gas transit agreement with Russia, which will expire by the end of this year". Instead, the EU is interested in promoting further integration of the Ukrainian GTS with the European energy system.

Without Russian gas transit, the Ukrainian GTS will operate in a special mode, but appropriate measures have already been prepared for this. Oleksandr Omelchenko, the Chairman of the Kyiv City State Administration, explained: "No major difficulties are expected in transferring the GTS to a transit-free mode. How will it work? This will include pumping gas from our own production and storing natural gas in UGS facilities". In addition, on May 14, President Volodymyr Zelenskyi signed a law that will simplify customs clearance of biomethane. The German lobbying organization Zukunft Gas noted this as an important step in support of the energy sector.

When it comes to the "usual suspects", the European Union countries that are now actively looking for a so-called "alternative to Russian gas", many of these countries were technically and politically ready to refuse to transit Russian gas through Ukraine when the completion of Nord Stream 2 was approaching. For example, Hungary has been switching to alternative routes for Russian gas supplies for several years now, including through TurkStream and other routes in southwestern Europe, signing a contract with Gazprom in 2021, and has also started receiving gas from Algeria from Sonatrach oil company. As for Austria, the Austrian energy regulator E-Control has taken into account the possibility of suspending gas exports from Gazprom in the coming years. Alternative transportation routes through Italy and Germany are already being actively used, and Austrian utilities have prepared for a possible cessation of gas supplies from Russia. Slovakia can receive gas from Poland, where it originates from liquefied natural gas (LNG) from the United States, which is delivered via Lithuania and converted into gas in a Polish port by Orlen PGNiG Supply & Trading. Although Slovakia officially claims to be supplying Azerbaijani gas, it is fully aware that a significant portion of this gas is being transported from Russia. Therefore, gas supplies through Poland remain a reliable option for the country.

It is important that the EU is systematically investing in the development of the relevant gas infrastructure, which, as European Commission representative Tim McPhee noted, "helps member states to secure gas from sources other than Russia".

Another important factor to consider is that the transit of all gas through Ukraine accounts for only 4.52% of total consumption in Europe. In 2022, EU countries consumed more than 350 billion cubic meters of gas. In 2023, consumption decreased by 13.5%, reaching approximately 302.75 billion cubic meters. In 2023, Russian gas transit through Ukrainian GTS decreased by 28.4% compared to 2022, decreasing by 5.8126 billion cubic meters to 14.6466 billion cubic meters. Even if transit through the Ukrainian GTS is stopped, no EU country will be left without gas. Since 2014, Ukraine has been consistently working towards its energy independence from Russian energy resources. We currently produce enough gas to meet our own needs. When it comes to the Ukrainian GTS, it is worth following the example of the strategic and historic step of uniting the Ukrainian energy system with the European ENTSO-E and disconnecting it from the Russian one on the eve of a full-scale invasion in 2022.

It's time to take the same step with regard to the Ukrainian GTS – to stop completely the transit of any gas coming to Ukraine from the territory of the aggressor country. 

Azerbaijani gas or a Russian wolf in sheep's clothing

We are now witnessing attempts to save the former Russian flagship of the Russian economy, Gazprom, under the guise of the legend of "Azerbaijani gas imports" to Europe, under the guise of a desire to help individual states provide themselves with gas. In Baku, on August 19, 2024, Putin met with Azerbaijani President Ilham Aliyev, during which, according to the Report, an agreement was reached between the State Oil Company of Azerbaijan (SOCAR) and Gazprom to expand their partnership, including the supply of Russian gas to Azerbaijan. The very next day, on August 20, it became known that Azerbaijan had submitted an official application to join the BRICS, which is clear proof of its commitment to Russian interests.

In other words, the "repainting" of Russian gas as Azerbaijani gas is being openly discussed. Russian gas could again go through the Russian and Ukrainian gas transmission systems to Hungary, Austria, Slovakia, and other European countries. This was also stated by Slovak Prime Minister Robert Fico on May 7 in Baku during a meeting with Azerbaijani President Ilham Aliyev. Aliyev spoke about his intention to increase the volume of Azerbaijani gas supplies from the current 8 billion cubic meters to 12 billion this year, and further reach 20 billion cubic meters by 2027.

Fico, in turn, emphasized the interest of Slovakia, which consumes about 4.5 billion cubic meters of gas annually, in supplying large volumes of gas to diversify its energy sources.

"For obvious reasons, Russia and Ukraine can no longer export gas to Europe. We are naturally interested in supplying large volumes of gas to Slovakia. We are talking about around 20 billion cubic meters of gas per year. This will make a significant contribution to the diversification of gas supplies to Europe", Fico said.

The statement that Europe has huge gas needs is not true. The needs of Europeans are specific and defined, while Fico's statements about large volumes of gas are often exaggerated or part of propaganda. According to the Institute for Energy Economics & Financial Analysis, gas consumption in Europe in 2023 fell to its lowest level in 10 years by 20% as countries step up efficiency measures and deploy renewable energy sources.

In fact, Azerbaijan has no free gas volumes to pump to the EU through Ukraine. According to Aura Sabadus Senior Research Fellow at the Center for European Policy Analysis (CEPA): "Azerbaijan's gas production isn't that big. The country has large domestic gas supply needs and already exports gas to Georgia, Turkey and Europe".

This year, the country plans to sell 13 billion cubic meters of gas to Europe through the TANAP pipeline connecting Georgia, Azerbaijan and Turkey. The Azerbaijani oil and gas monopoly SOCAR has a stake in the TANAP pipeline, and it makes no sense for it to redirect volumes through Russia and Ukraine. The project can only make sense if Russian gas continues to be transported through the Ukrainian GTS under the guise of Azerbaijani gas. Aliyev will make money on this as an intermediary, but the Russians will continue to receive the main income, which is absolutely unacceptable.

Source: DW. Description: Transportation of gas from Azerbaijan to Turkey, Greece and other European countries.
https://www.dw.com/en/how-to-use-ukraines-gas-pipelines-when-russia-deal-ends/a-69640265

Also, there is a serious question of whether it makes sense to transport Azerbaijani gas through Russia and Ukraine, as this route significantly increases the cost of Azerbaijani gas. If the price is kept at the current level, it will be clear proof that the gas sold as Azerbaijani gas will be a Russian "wolf in sheep's clothing" disguised as other products.

The main idea is that from December 31, 2024, the "door" for Russian gas transit through Ukraine will be "closed and securely bricked". Thus, the Kremlin regime is trying to break into the European gas market under the guise of "Azerbaijani gas". And the goal here is not only to save the bankrupt Gazprom, but also to return economic leverage to political decisions made at the level of member states and the European Union as a whole.

It's time to win the war of narratives and debunk the myths surrounding the Ukrainian GTS

Russia is actively spreading propaganda and spreading myths in order to maintain and regain its position in the European gas market.

The myth that Europe will freeze in winter without Russian gas. European countries have long prepared for the winter season by having sufficient gas reserves and alternative supply routes. European governments have invested in new gas storage and import capacities to meet the needs of Europeans.

The myth that is being actively used in Ukraine's information field that Ukraine's gas transportation infrastructure serves as a shield against Russian attacks is also not true. In fact, Russia continues to cynically shell Ukrainian gas storage facilities and key elements of our gas infrastructure, including gas distribution stations.  The existence of a transit agreement did not stop Putin from deciding to launch a full-scale aggression in 2022, and the transit of so-called Azerbaijani gas will not serve as a shield to protect our energy facilities.

Gas has always been and remains one of the main instruments of Russia's influence on international politics. For the Russian Federation, the gas market is not only economically profitable but also strategically important. Part of the proceeds from gas sales are used to bribe European politicians, which allows Russia to influence important decisions in the EU. This approach ensured Putin's long-term influence on the European Union even after the annexation of Crimea and the seizure of part of the territories in eastern Ukraine. The recent agreement between SOCAR and Gazprom to expand their partnership is evidence of a new attempt by Russia to penetrate the European gas market.

Realizing these risks, it is crucial that both Ukraine and the European Union prevent Russia from using its influence schemes again. It is important for European politicians to realize that any economic concessions in the energy sector lead to a loss of political independence.

The only right decision is to completely disconnect the Ukrainian gas transmission system from Russia, from this legacy of the USSR, and become an integral part of the European gas infrastructure. This is a step not only towards Ukraine's energy independence, but also towards protecting the energy security of the whole of Europe.