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Naftogaz says may transit gas via 3rd parties to EU if Ukrainian sanctions

By Nadia Rodova in Moscow

August 11, 2014 - Ukraine's national oil and gas company Naftogaz said August 11 it may continue to transit Russian gas to Europe, via third parties, if sanctions are imposed on Gazprom by the government as part of the measures it is considering against Russia.

On August 8, Prime Minister Arseniy Yatsenyuk said his government had proposed a number of sanctions against Russia, including the right to halt the transit of resources via Ukraine.

Yatsenyuk said he hoped parliament would consider the proposal August 12.

Under the bill, Ukraine has the right to apply 26 different types of sanctions, including freezing assets, banning businesses from operating in Ukraine, and a complete or partial ban on transit of all resources.

Analysis continues below...

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Yatsenyuk said the proposed sanctions included "the ability to stop any kind of transit, from air travel to transit of resources.";

Ukraine is a key transit country for Russian gas exports to Europe and the halt in the deliveries could have a serious impact on some European countries, which are heavily dependent on Russian gas.

In 2013, Gazprom shipped 84 billion cubic meters of gas through Ukraine, 52% of its total exports to Europe.

Naftogaz said that the sanctions, if approved, may limit or ban Naftogaz and its transportation subsidiary Ukrtransgaz from providing services to sanctioned companies.

"In this case, natural gas transportation services for supplies to the EU countries, Turkey and Moldova might be provided via subcontractors that are not subject to the sanctions," Naftogaz said in a statement.

"In order to do so, [subcontractors] would need to sign direct contracts with the operator of the Ukrainian gas transportation system," it said.

Gazprom declined to comment.

At present, Russian gas transits Ukraine under a contract with Gazprom, but the Ukrainian authorities warned earlier this year that they might stop gas transit due the the dispute with Gazprom over the gas price and debt Ukraine owes Russia for gas already supplied.

In June, Gazprom CEO Alexei Miller said Gazprom hoped it would be able to make up for some of the potential loss of deliveries to Europe by increasing supplies via the subsea Nord Stream line to Germany and the Yamal pipeline through Belarus but these routes would not offset the losses in full.

Oil transit

Ukraine is also an important transit route for Russian oil.

These supplies, however, are likely to remain unaffected, according to the regional head of Ukrtransnafta, Ukraine's oil pipeline operator.

Ukraine was not planning to ban transit of Russian crude, Mikulash Rakovsky told reporters in Bratislava August 9, according to media reports.

"Based on my talks with Ukrtransnafta's CEO Alexander Lazorko, I, as the head of Ukrtransnafta's representative office in Central European countries, was authorized to deny those reports and confirm that no laws are being prepared to limit supplies of Russian crude via Ukraine further to the west," Rakovsky was quoted as saying by Ukraine's UNN news agency.

The 2014 delivery program envisages a total of 14 million mt of Russian crude to be supplied to Europe via Ukraine.

Transneft believes that, in case of problems, these volumes could be re-directed into the northern line of Druzhba pipeline, which transports crude to Europe via Belarus, and to export terminals on the Baltic Sea.

At the same time, it hopes that the current flows remain intact, a spokesman at the company said, adding that any redirection of the volumes would mean an increase in crude cost.

Transneft sends around 50 million mt/year of crude via Druzhba, including 36 million mt/year via Belarus.

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