Russia has begun to scale back its gas supplies to Europe via Ukraine, coinciding with the expiration of a five-year pre-war deal on New Year’s Day.
As of January 1, 2025, Russian gas supplies to European Union nations through Ukraine will effectively cease. Ukraine’s gas transit operator has confirmed that Russia did not nominate any gas flows via Ukrainian pipelines for this date.
This situation marks the conclusion of a lucrative agreement signed in 2019, which allowed Russia to export Liquefied Natural Gas (LNG) through Ukraine before reaching its final European destinations.
This deal significantly benefited both Moscow and Kyiv, generating billions in revenue for the Kremlin while providing essential transit fees to Ukraine.
Ukraine’s President Volodymyr Zelenskyy announced that he would not seek to renew the agreement, emphasizing the importance of allowing Europe to reduce its reliance on Russian gas and preventing the Kremlin from profiting further from the conflict.
The termination of this historic gas route represents a pivotal moment in Europe’s energy landscape, coming amid a decade-long strain in relations that began with the annexation of Crimea in 2014.
Following Russia’s invasion of Ukraine in February 2022, the European Union has accelerated its efforts to decrease dependency on Russian energy sources. Recent data shows that Russian gas now comprises only about 8% of the EU’s total gas imports in 2023, a drastic drop from over 40% in 2021.
The EU has sought alternative energy supplies from nations such as Qatar and the United States. Due to these shifts, Gazprom, Russia’s state-controlled energy company, reported a staggering $7 billion (€6.73 billion) loss for the first time in over 25 years.
However, despite the overall decrease in imports, several Eastern European EU member states continue to depend significantly on Russian gas. Countries like Austria and Slovakia still import considerable amounts, with estimates suggesting revenues for Moscow could reach around €5 billion from these imports.
Fortunately, Austria has reported no anticipated supply disruptions, thanks to its diversified sources, including LNG imports through Italy and Germany, as well as maintaining a healthy gas reserve.
Slovakia, on the other hand, has prepared itself adequately but now faces an additional €177 in transit costs, as gas will be sourced from western routes instead of directly from the east.
Neighboring non-EU countries like Moldova, formerly part of the Soviet Union, are predicted to suffer significant economic losses due to the gas supply changes.
Impacts of the Deal’s Expiry on Europe
Despite measures taken to mitigate the impact of reduced Russian gas imports, Europe is feeling the strain. Energy prices have surged, negatively affecting the competitiveness of European industries compared to their American and Chinese counterparts.
Many countries are grappling with economic slowdowns, driven by rising inflation and an escalating cost of living crisis.
Ukraine stands to lose approximately €1 billion in annual transit fees, a fraction compared to the €5 billion loss forecasted for Gazprom due to the end of this agreement.
Plans for the Future
In December, the European Commission unveiled plans to assist EU member states in completely transitioning away from Russian gas.
In a detailed report, Brussels outlined strategies for filling the supply gap using gas from Greece, Turkey, and Romania via the Trans-Balkan route.
Norwegian gas is also being considered, which could be routed through Poland, while Germany is prepared to facilitate distribution through central Europe.
However, implementing these plans is logistically challenging, requiring substantial adjustments to long-standing infrastructure established over decades of reliance on Russian gas.
Since 1991, Russia has been a dominant supplier, reaching a peak of around 35% of the European gas market.
Additional sources • AP
Photo credit & article inspired by: Euronews
