Ukraine Halts Russian Gas Transit to Europe, Ending Decades-Long Dominance
Russia’s state-owned energy giant Gazprom confirmed on January 1 that gas exports to Europe via Ukraine had stopped at around 8 a.m. local time. This move marks the end of a five-year transit agreement between Russia and Ukraine, which was not renewed due to the ongoing war.
Ukraine will lose up to $1 billion a year in transit fees, while Gazprom is poised to lose close to $5 billion in gas sales. The European Commission has been working with EU member states to prepare for this scenario, with Slovakia, Austria, and Moldova being among the countries most affected.
Russia can still send gas via the TurkStream pipeline, which links Russia with Hungary, Serbia, and Turkey. Ukraine’s Energy Minister described the cessation of Russian gas flows as a “historic event,” saying that Russia is losing markets and will suffer financial losses.
The EU’s gas storage facilities are currently around 73% full, with Germany’s inventories at nearly 80%. Analysts say that the EU will require about 7.2 billion cubic meters of gas to be sourced from the LNG market, which can be supplied by terminals in Poland, Germany, Lithuania, and Italy.
Some countries, such as Austria, are well prepared for the stoppage, while others, like Slovakia, are more concerned. Moldova has declared a 60-day state of emergency over energy security fears.
The expiry of the deal does not threaten EU winter energy security, according to analysts, who cite steps taken by EU importers to prepare for the cut in supply and mild winter weather. However, gas price moves over the coming months are likely to hinge on political developments in the Russia-Ukraine war and remaining winter weather conditions.
