Ukraine sees the transit agreement aiding Moscow’s war finances, but it stands to lose £634 million a year from transiting fees for a pipeline that connects Russia to Poland, Slovakia, Hungary, Romania and Moldova.
The gas “swap” is one of several possibilities on the table, and Ukraine’s President Volodymyr Zelensky confirmed his government was in talks with Baku on this and other options in an interview with Bloomberg over the summer.
“It’s very difficult to say what the most likely deal will be, but ultimately it is Ukraine who decides. Ukraine has to sign a transit agreement,” said Ugnė Keliauskaitė, an energy research analyst at Bruegel.
He added: “Purchasing Azeri gas only to exchange it for Russian gas would not result in any progress in terms of the EU reducing its reliance on Russian energy.
“Russia would still be able to cut the gas, as it has done in the past, and set a precedent for supplying Azeri gas to the EU, increasing the dependence on Russian gas.
“At the end of the day there would be no change in gas flows”.
Azerbaijan’s president, Ilham Aliyev, also said he had been approached by Ukraine and the EU for assistance in maintaining gas transit via Ukraine.
The swap deal could ultimately give Russia a backdoor to influence European energy markets.