<article><p class="lead">An agreement between the US and Germany will frame commercial arrangements for transit of Russian gas through Ukraine after 2024, with Kyiv largely left out of the discussion.</p><p>Berlin has committed to use "all available leverage" to extend Ukraine's 2020-24 gas transit agreement with Moscow for up to a further 10 years under the agreement. Diplomatic efforts are to start "as soon as possible" and no later than 1 September.</p><p>German chancellor Angela Merkel and Russian president Vladimir Putin today discussed a possible extension of Ukrainian transit beyond 2024, the Kremlin said. </p><p>Washington at the same time says it has obtained Berlin's consent for mitigation measures to ensure that Russia in the future does not fully cut off transit through Ukraine and financial guarantees for Kyiv to offset any revenue it may lose if Russia diverts its supply through Nord Stream 2.</p><p>"Should Russia attempt to use energy as a weapon or commit further aggressive acts against Ukraine," Germany will take action at a national level and press for effective measures at an EU level, including sanctions, to limit Russian energy exports to Europe or in other economically relevant sectors, the joint statement says. </p><p>The Nord Stream 2 developer aims to put the line into operation <a href="https://direct.argusmedia.com/newsandanalysis/article/2233706">this year</a>. But the link still needs to pass several regulatory steps before it can be commissioned.</p><p>Ukraine's transit revenue amounted to at least $2.06bn last year and is set at $1.27bn/yr in 2021-24, based on long-term bookings and the current cost of network fees. The deal was signed in 2019 with a clause allowing it to be extended by another 10 years if agreed by parties.</p><h2>Ukraine's EU energy integration prioritised</h2><p class="lead">The joint statement details German commitments to further integrate Ukraine into EU gas and power markets.</p><p>Germany plans to launch a Ukraine Resilience Package to support Ukraine's energy security, which will include "efforts to safeguard and increase capacity" for gas flows to Ukraine from the EU, with the aim of "shielding Ukraine completely from potential future attempts by Russia to cut gas supplies".</p><p>Ukraine and Hungary are already negotiating to establish <a href="https://direct.argusmedia.com/newsandanalysis/article/2227931">firm Ukrainian import capacity</a>. Most Russian flows to Hungary through Ukraine could be rerouted through Serbia from October. </p><p>And Ukraine is considering several other options for creating more firm capacity, including <a href="https://direct.argusmedia.com/newsandanalysis/article/2234999">from Slovakia</a> and Poland — with the latter opening up the possibility of <a href="https://direct.argusmedia.com/newsandanalysis/article/1971489">Ukraine importing LNG</a> from the 3.9mn t/yr Swinoujscie terminal.</p><p>Germany and the US will establish a $1bn Green Fund to help Ukraine's energy transition. It will focus on renewable energy, the development of hydrogen and an accelerated transition from coal.</p><p>Germany will also support bilateral energy projects with Ukraine, including assisting with identifying options to modernise Ukraine's gas transmission system.</p><h2>Third Energy Package in spotlight</h2><p class="lead">Berlin also committed to abiding by "both the letter and the spirit" of the Third Energy Package with respect to Nord Stream 2. </p><p>Nord Stream 2 <a href="https://direct.argusmedia.com/newsandanalysis/article/2227975">last month</a> already applied to operate the pipeline in the 54km section of the German territorial sea covered by EU rules. </p><p>EU rules also require the pipeline operator to offer third-party access along that part of the route. </p><h2>Ukraine left out</h2><p class="lead">The US has not compelled Ukraine to agree to the terms of the deal, a senior US official said.</p><p>"Ukraine is not losing any revenue and will gain funding" for energy transition, they said.</p><p>Naftogaz chief executive Yuri Vitrenko flew to Washington today and made the case in a radio interview that no amount of guarantees would mitigate negative geopolitical effects from the Nord Stream 2 project.</p><p>And Ukraine's foreign minister Dmytro Kuleba has formally initiated a consultation with the EU under a treaty with the bloc, noting that Nord Stream 2 "threatens Ukraine's security and violates the diversification principle of the EU Energy Union".</p><p>In what is likely a conciliatory message, the White House today announced that Ukrainian president Volodymyr Zelenskiy will visit the White House on 30 August.</p><p class="bylines"><i>By Haik Gugarats and Paul Martin</i></p></article>
