Representatives of Russia and Ukraine signed a protocol on gas transit and claims settlement following the results of gas negotiations in Minsk on December 20.
According to Alexey Miller, the chairman of Gazprom’s Management Committee, Russia’s Gazprom and Ukraine’s Naftogaz may sign a contract on transit of Russian gas through Ukraine for 5 years, the volume of gas transit in 2020 will amount to 65 bln cubic meters, and in 2021-2024 – 40 bln cubic meters annually.
Miller said that the agreement would envisage “a waiver of any new claims, withdrawal of arbitration and legal claims that did not result in final decisions and a payment in line with the verdict of the Stockholm court.”
The gas agreements include an increase in the transit tariff, the payment of $3 billion to Ukraine by the decision of the Stockholm arbitration until the end of 2019. It should be noted that the Ukrainian dept for Russian gas supplies is now about $3 billion. Nonetheless, the Kiev leadership rejects any set-off proposals and demands a direct payment of $3 billion from Russia. At the same time, the Ukrainian side does not even consider a possibility of returning its $3 billion dept to Russia anytime in the near future. So, the agreements are not equitable.
Ukraine’s fiscal revenues in 2019 are expected be reach $36.97 billion. Therefore, the $3 billion payment from Russia is equal to approximately 8% of Ukraine’s annual fiscal revenue.
According to Ukrainian sources, Ukraine receives approximately up to $3 billion per year as gas transit fees from Russia. In 2019, Russia transited about 87 bln cubic meters through Ukraine. Ahead of the gas agreements between Moscow and Kiev, Russian President Vladimir Putin announced that Russia is to continue selling gas to Ukraine with a 25% discount. In own turn, Ukraine sells gas to its businesses and population at market-bases rates under demands of the IMF. This situation would allow the Ukrainian government to get up to $1.5 billion of revenue.
The money received by the Kiev regime will be used to pay loans to the IMF and EU instituations and increase military expenditures to combat the so-called “Russian agression”. Ukraine’s 2020 national budget includes more than UAH 245 billion (about $9.9 billion) for security and defense. In the 2019 budget, the spending on security and defense was about UAH 185 billion (about $8 billion). This is the increase of 23%.
Furthermore, the Ukrainain Prime Minister revealed that the years of 2019-2021 will be the peak period of paying external obligations to Western creditors – the IMF and EU institutions. The total spending planned in Ukraine’s 2020 national budget is UAH 1195.3 billion ($48 billion). The main expenditure item is the public debt managment: UAH 141 billion ($5.7 billion).