Ukraine is running out of time to provide western gas consumers with the necessary trust to abandon the Nord Stream 2 gas pipeline project.
Nord Stream 2, the gas pipeline to directly connect Russia and Germany, is undoubtedly bad for Ukraine. It will allow Gazprom to largely circumvent the Ukrainian gas transit system when supplying EU consumers. This could result in significantly lower transit revenues for Ukraine: up to USD 2 billion per year, which currently corresponds to about 2-3% of Ukraine´s GDP.
More importantly, it might make gas supplies from the EU to Ukraine more difficult. If Russian gas supplies to Slovakia are delivered through Nord Stream 2, Germany and the Czech Republic, the price of this gas at the Ukrainian border will be significantly higher – if the volumes are at all sufficient to supply Ukraine.
Hence, Ukraine might be forced to resume buying gas from Russia. Without the leverage of gas transit it used to have in the past, these negotiations will be very one-sided. In fact, Russian demands might not only be about substantial prices, but could also include political components.
Ukraine is not doing enough to prevent Nord Stream 2 from happening. True, Naftogaz and some policy makers are trying to lobby in Washington and Brussels to prevent the pipeline from being built. But they do not have good arguments to convince influential European gas consumers.
See link below to the Bruegel Institute webpage to read the complete article.
