End Of An Era: Ukraine Halts Transit Of Russian Gas To Europe

An era came to a close in Europe on the first day of 2025.

Russian gas exports via Soviet-era pipelines running through Ukraine came to a halt on New Year’s Day, marking the end of five decades of Moscow’s dominance over Europe’s energy markets, as well as cheap gas that kept Germany’s economy humming.

The gas had kept flowing despite nearly three years of war, but Russia’s gas firm Gazprom said it had stopped at 0500 GMT after Ukraine refused to renew a transit agreement as we previously noted.

According to Reuters, the widely expected stoppage is unlikely to impact prices for consumers in the European Union – unlike in 2022, when falling supplies from Russia sent prices to record highs, worsened a cost-of-living crisis and hit the bloc’s competitiveness – however, that is a rather naive statement since European nat gas prices have been rising all year and closed 2024 more than doubling from their February lows. They will only keep rising now.

The last few European buyers of Russian gas via Ukraine, such as Slovakia and Austria, had already arranged alternative (and far more expensive) supply, while Hungary will keep receiving Russian gas via the TurkStream pipeline under the Black Sea. But Transdniestria, a breakaway pro-Russian region of Ukraine’s neighbor Moldova also reliant on the transit flows, cut off heating and hot water supplies to households early on Wednesday. Local energy company Tirasteploenergo urged residents to dress warmly, hang blankets or thick curtains over windows and balcony doors, and use electric heaters.

The European Commission said the EU had prepared for the cut-off.

Russia and the former Soviet Union spent half a century building up a major share of the European gas market, which at its peak stood at around 35%.

But the EU has slashed its dependence on Russian energy since the start of the war in Ukraine by buying more piped gas from Norway and LNG from Qatar and the United States.

“The European gas infrastructure is flexible enough to provide gas of non-Russian origin,” a spokesperson for the Commission said. “It has been reinforced with significant new LNG (liquefied natural gas) import capacities since 2022.”

The biggest beneficiary of said LNG imports is, of course, the US which has seen its LNG exports to Europe soar since the Ukraine war and since the US blew up the Nordstream pipeline, making (expensive) US sourced LNG one of the few realistic alternatives for Europe. In other words, Europe has gone from relying entirely on cheap Russian gas to relying entirely on expensive US LNG.

Ukraine, which refused to extend the transit deal under pressure from the vegetable in the White House (whose son was recently pardoned for any crimes starting around the time Hunter Biden was appointed to the board of Ukraine’s energy giant Burisma), said Europe had already made the decision to abandon Russian gas.

Combined pipeline routes from Russia delivered a record high 201 billion cubic metres (bcm) of gas to Europe in 2018. The number however ground to a halt after the Ukraine war; the Nord Stream route across the Baltic Sea to Germany was blown up by the US in 2022 and the Yamal-Europe pipeline via Belarus has also shut. Russia shipped about 15 bcm of gas via Ukraine in 2023, down from 65 bcm when the last five-year contract began in 2020.

“We stopped the transit of Russian gas. This is a historic event. Russia is losing its markets, it will suffer financial losses,” Ukraine’s Energy Minister German Galushchenko said in a statement.

While Ukraine’s propaganda is understandable – Russia long ago found alternative end markets – nobody will suffer as much as Germany.

As Bloomberg’s Stephen Stapczynski wrote, “Cheap Russian gas was the backbone of some European economies for essentially half a century. That’s now ending. And Europe is set to face higher-for-longer gas prices.” One needs only to look at the ongoing collapse of Germany’s economy to observe this in real time.

And some more context from the Bloomberg analyst who writes that Russia provided half of Germany’s gas in 2021. It’s now zero, and so “due in part to the loss of Russian energy and other factors, Germany’s economy is 5% smaller than it would have been if the pre-pandemic growth trend had been maintained.”

Ukraine, of course, is also a loser: the country that has become a deep state testing bed for World War 3, will lose up to $1 billion a year in transit fees from Russia. To help offset the impact, it will quadruple gas transmission tariffs for domestic consumers from Wednesday, which could cost the country’s industry more than 1.6 billion hryvnias ($38.2 million) a year.

The company halted supply to Austria’s OMV in mid-November over a contractual dispute but in recent weeks Russian gas has been reaching Austria via Slovakia at a rate of around 200 gigawatt hours (GWh) per day. For Jan. 1, only about 7 GWh per day is expected to flow from Slovakia to Austria, Austrian energy regulator E-Control said.

Slovakia’s main gas buyer SPP said it would supply its customers mainly via pipelines from Germany and also Hungary, but would face additional transit costs.