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Gas supplies to Europe remain as reliable as before

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World Pipelines,

Gazprom, the Russian gas monopoly, has initiated a process that would terminate its gas supply contracts with Ukraine's Naftogaz. This move has raised concerns about the reliability of gas supplies to countries in Europe.

Gazprom made the decision to terminate all gas contracts with Ukraine following the imposing on the gas giant of a US$2.5 billion penalty on 28 February by the Arbitration Institute of the Stockholm Chamber of Commerce. The penalty to Gazprom was the result of the dispute with Naftogaz, Ukraine’s national oil and gas company, where Gazprom failed to deliver an agreed-upon volume of ‘transit gas’.

The decision to terminate the contracts not only marked an escalation in a multi-year dispute between Moscow and Kiev, which has left Ukraine struggling to stay warm, but also led to concerns about downstream gas supplies to European countries. A considerable amount of Russian gas to Europe is transported via Ukraine’s pipeline system. A previous gas dispute between Russia and Ukraine in 2009 led to a significant reduction in supplies to Europe during freezing winter weather.

Russia’s Energy Minister Alexander Novak told European Commission Vice President Maroš Šefcofic that “until the contracts between Gazprom and Nafrogaz are terminated in court, there is no risk to transit of gas via Ukraine”.

Ukrainian President Petro Poroshenko said that Ukraine saw an increase in gas supplies from Poland, Slovakia, and Hungary, which has fully offset the impact of Gazprom’s decision.

Gazprom had intended to resume gas supplies to Ukraine for the first time since late 2015 when Kiev started buying gas from Europe to try to cut its energy dependence on Moscow. However, the Russian giant cancelled that plan on 2 March, the day before the announcement of the contract termination.

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