Russia And Ukraine Reach Major Deal On Gas Transit

Russia and Ukraine recently reached a deal on gas flowing from Russia through Ukraine to Europe.

Per FT, a major gas transit deal has been reached between Ukraine and Russia “in principle” and will likely be imminently signed into effect by Moscow and Kiev leadership, ultimately ending a standoff after Ukraine ceased buying gas directly from Gazprom in 2015:

European natural gas prices fell sharply on Friday after Russia and Ukraine reached a provisional deal to allow the continued transit of gas to Europe in the new year. A stand-off between the two countries had threatened to disrupt supplies to Europe when the existing contract expires on December 31.

…Late on Thursday, Russian energy minister Alexander Novak and his Ukrainian counterpart Oleksiy Orzhel said they had struck an agreement in principle for a new contract, adding that talks were set to continue in Minsk on Friday.

eports that both sides are closer to avoiding a third gas crisis since 2005 knocked prices across Europe on Friday morning, with UK contracts for delivery in January down 7 per cent to 36.25 pence per therm. Prices in the Netherlands dropped by a similar amount to €14 per megawatt hour.

…The gas price plunge stands to benefit Ukraine as it continues negotiations with Russia not only on the preliminary agreement on prolonging transit to European markets but also on the price and conditions for restoring Russian gas supply for domestic consumers.

This means that 2020 will witness Russian gas flow as normal across Europe via Ukraine. (source)

Some are saying that this deal is a loss for the US in terms of her foreign policy, especially as Germany and Russia are now decrying US sanctions on both nations as a result of choosing to pursue the Nord Stream 2 pipeline.

However, I would like to offer a different perspective, and that is that the US likely emerges as the “stronger” position even in spite of this.

As one report notes, both Nordstream as well as the Turkstream lines, the latter of which will go through Turkey to Russia as well as the Balkans, will be built. At the same time, as I have noted before, the US and Israel are working on building pipelines that will tie to Turkey by way of TANAP-related projects well as go directly under the Mediterranean to Cyprus, bypassing Turkey and then going into Greece and Italy before Germany.

One should also not forget too that major pipelines are being worked on from all points of West Africa to Europe, which the US and France are playing a major role.

The point is that at the current time or near future, there is going to be no shortage of gasflow from either Russia, Turkey, the Middle East, or Africa into Europe, which at this point is ostensibly the German economy, since they are the most powerful nation.

The concern with Russia and Ukraine that the US had was whether or not Russia would stop or significantly decrease sending gas via Ukraine and choose another route. This would affect Ukraine’s economy as she collects fees from the transit of gas, as well as it would likely bring Russia and Germany closer together.

The fact that Russia and Ukraine are maintaining so far (as things could change) the current state of their contract is crucial because it means no decrease in the gas flow, and that means no change to the political situation between Russia, Germany, and the US as it pertains to this.

Certainly the US will protest the building of Nord Stream 2. However, the fact that the gas rate through Ukraine remains the same means that Nord Stream 2 will only add extra fuel supply option to Germany. Think of it as building an additional road to the same destination, so that there are two roads instead of one, as opposed to closing off one road and building another one, or building a new road while significantly re-routing traffic by another means.

Now take the above example with the roads, and put the TANAP projects, the Israeli line, and the African lines in. Now there are at least three more roadways going to the same location bringing the same products so there are five roads going to the same destination.

If there are five roads, all from four different sources (Russia, Middle East, Israel, West Africa), then Germany now has options through which to buy, and with a lot of options being opened, it means that the price of oil and gas to Germany has the possibility to significantly decrease with time due to competition.

This is a huge benefit to the US and Germany- but not to Russia -because Russia depends upon the sale of gas to other nations to support her nation. Russia has no real economy save for the manufacture and export of cheap military goods to countries that she is attempting to influence, or the sale of raw, natural resources to other nations with little processing most of the time.

Russia needs Europe to buy gas to help her get money because she is poor and miserable and will probably get a lot worse in the future. Germany right now buys a lot of gas from Russia, and will buy more by way of Nord Stream 2.

What will be interesting now is to see what the US does, especially as it regards the construction of TANAP-related projects, the Israeli lines, and Africa, since the addition of these lines could drop the price of gas for Germany, give her options, and pull her more into the American realm of influence.

It is possible that we are seeing a “race” emerge again between the US and Russia, except this is over pipelines to Germany.

The “sanctions” on Russia and Germany right now could be an attempt to stall the production of Nord Stream 2 and Turkstream while the US works on getting alternative means of transport to Europe by way of her other projects. The question is if the US can do this soon enough and in such a way as to prevent a serious economic war with Germany or other problems that would draw her closer to Russia and result in the creation of a Molotov-Ribbentrop type agreement, which is what the US is concerned about.

If Germany and Russia do come together, then the US cannot stop them. However, there is another fact, which is that Germany and Russia, after working together, always end up fighting. This is another historical constant going back over a thousand years. In such a case, Russia will immediately shut off gas lines to her. However, this is where the US lines in Turkey, from Israel, and Africa will supply, for they will be able to sustain and even grow the German war machine as she will naturally- and immediately -press into the Volga region and towards Volgograd just like what she did in 1942, while at the same time sabotaging Russian lines in Siberia and Far East.

In a situation such as this, the Russians will likely attempt to do what they did at Stalingrad (Volgograd), which was throw as many people into battle as possible, only to be slaughtered. Most Germans at Stalingrad died because of weather, not because of “superior Russian tactics”, as the battle was from a tactical standpoint and in spite of Soviet and Russian propaganda, a slaughter. Quite literally it was the ‘hand of God’ that stopped a German conquest of Russia.

The US in such a situation would likely sit out a conflict, and then attempt to do what she has done before, which is to jump in at an opportune time and seize onto the winning side, of which considering these and historical conditions, and barring any major changes to the current state of events, may not be Russia but Germany. However, this could certainly change, for it is known that the US worked with Germany to finance the Reich by way of the Stein Bank while fighting against the National Socialists at the same time in World War II.

There are many situations that one can speculate into. What we can say is that while there will be a lot of fighting about Nord Stream and other lines, the situation with gas in Ukraine has been stabilized for now which may delay, but will not in itself prevent, a re-establishment of Germano-Russian ties that could lead to a kind of “united European military” in preparation for another major global conflict.

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