Russia, Ukraine Agree "In Principle" on New Transit Deal: Update

(adds report of Russia agreeing to settle Stockholm award)

Russia and Ukraine have agreed “in principle” on a new gas-transit agreement, European Commission official Maros Sefcovic said on December 19.

Details should be finalised on December 20.

“After these very intensive talks I am very glad to say that we reached an agreement in principle on all key elements which I believe is very positive news for Europe, for Russia and Ukraine,” Sefcovic told reporters.

Russia and Ukraine’s 10-year transit contract is due to expire on December 31. Talks have intensified over the past few weeks, but this is the first signal of a potential breakthrough.

According to Russian energy minister Alexander Novak, a draft protocol has been prepared that will soon be approved and signed. His Ukrainian counterpart Oleksiy Orzhel confirmed this, praising the “positive results for all sides.”

One of the issues preventing Russia and Ukraine from reaching a compromise has been Gazprom's refusal to settle a $2.56bn Stockholm arbitration award to Naftogaz, relating to violations of their current transit contract. The award, issued early last year, has since accumulated interest.

Russia has finally conceded and agreed to pay Ukraine around $3bn to end the legal dispute, sources told Reuters on December 20.

Russian president Vladimir Putin indicated Russia would abide by the Stockholm ruling during his annual news conference on December 19. While dismissing the award as “political” in nature, he said “the decision of the court exists, it is true, and we should be ruled by it.”

“We will be ruled by it and find an acceptable solution for everyone, even for Ukraine,” he said.