Ukraine needs new gas contract with Russia to avoid supply disruptions to EU

Ukraine will have to negotiate a new gas supply deal with Russia at a time when the risks of an escalation of the conflict between the two countries have re-emerged. The gas deal with Russia's Gazprom expires at the end of the month, and Ukraine needs fuel to replenish its reserves ahead of winter.

At the same time, the ceasefire in the Donbas seems shaky. In addition, against the background of negotiations on the extension of sanctions against Russia, there is a threat to the gas contract of Ukraine, which still relies on its neighbor for half of the supplies. The issue is also important for the energy security of Europe, since gas from Russia enters the region through Ukrainian pipelines.

Experts say that "Europe could face a supply disruption next winter, like 2006 and 2009, if Russia and Ukraine fail to reach an agreement." Christian Brown, Luxembourg's ambassador to the EU-28, said that "Moscow denies the accusation made by President Poroshenko of a full-scale Russian invasion of eastern Ukraine. In addition, the EU may extend sanctions against Russia for another 1 year in the coming days."

At the same time, Ukraine, burdened with international debt obligations, will fight to keep Russia from raising prices for the country. Alternative supplies from Europe are unlikely to fully fill the gap, especially given Gazprom's ability to influence European flows. Gazprom said Ukraine could face a 16 percent jump in prices in the third quarter. This year, Ukraine needs more gas than last year, as its reserves are lower. According to the Russian Energy Ministry, Ukraine's state gas company, NAK Naftogaz, had 10.7 billion cubic meters of gas in underground storage last week, while the level should be at least 19 billion cubic meters.

Russia and Ukraine filed lawsuits against each other in international arbitration last year and are awaiting a decision. Russian Gazprom claims its Ukrainian counterpart owes $ 29.5 billion, while Naftogaz is demanding over $ 16 billion from the Russian company.