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“The Russia-Ukraine gas contract expires this month”
There is no grim coincidence in news that the death toll on the Russia-Ukraine border has begun to rise again, just as negotiations over Gazprom’s next quarterly gas supply deal ramp up.
Although recent months have brought a relative calm to the fractious relationship between Europe’s largest gas supplier and neighbouring Ukraine, the current gas supply contract expires at the end of June, meaning a fresh round of talks is unavoidable.
A Bloomberg report has already warned of “bloody clashes” in the coming weeks, pointing out that lower coal stocks in Ukraine have upped the ante.
The intense power play between the two nations, played out in cubic metres of pipeline gas, is not only a threat to the political stability of the region, but also to energy markets across Europe.
In March this year, the price of UK gas spiked 10 per cent as concerns over Russian gas supply climbed in line with reports of mounting tensions. Then, the impact was muted by the fact that Europe was about to enter a well-supplied summer. But now ahead of the third quarter of the year – a crucial time for topping up storage stocks ahead of the colder months – the markets could face greater volatility.
Europe’s situation is particularly precarious as customers delay their imports to take maximum advantage of the full impact of low global oil prices.
Although far from the negotiation table, those at Europe’s gas trading desks will no doubt be hoping for a resolution too.
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