Russian gas exports through Soviet-era pipelines running via Ukraine ceased on New Year’s Day, signaling the end of Moscow’s decades-long dominance over Europe’s energy markets.
Despite nearly three years of war, gas had continued flowing until Russia’s state-owned energy company Gazprom halted supplies at 5:00 GMT, citing Ukraine’s refusal to renew the transit agreement.
While the stoppage was anticipated, it is unlikely to affect consumer prices in the European Union, unlike the supply disruptions of 2022, which drove prices to record highs, exacerbated a cost-of-living crisis, and hurt the bloc’s competitiveness.
The remaining EU buyers of Russian gas via Ukraine, including Slovakia and Austria, have secured alternative sources, while Hungary will continue receiving Russian gas through the TurkStream pipeline under the Black Sea.
In Moldova’s pro-Russian breakaway region of Transdniestria, the halt in transit flows led to heating and hot water supplies being cut off early Wednesday. Local energy company Tirasteploenergo advised residents to use electric heaters and insulate their homes with blankets or heavy curtains.
The European Commission assured that the EU was prepared for the disruption. “The European gas infrastructure is flexible enough to accommodate non-Russian gas,” a Commission spokesperson said, noting the bloc’s significant investments in LNG (liquefied natural gas) import capacity since 2022.
For decades, Russia and the former Soviet Union maintained a dominant position in the European gas market, supplying up to 35% of its demand at the peak. However, since the onset of the war in Ukraine, the EU has dramatically reduced its reliance on Russian energy, increasing imports of pipeline gas from Norway and LNG from Qatar and the United States.
Ukraine, which declined to extend the transit deal, emphasized that Europe had already moved away from Russian gas. “This is a historic event. Russia is losing its markets and will face financial losses,” said Ukraine’s Energy Minister, German Galushchenko.
Economic Fallout
Ukraine will forgo up to $1 billion annually in transit fees from Russia. To mitigate the impact, the country plans to quadruple domestic gas transmission tariffs starting Wednesday, which could cost local industries over 1.6 billion hryvnias ($38.2 million) per year.
Gazprom is expected to lose around $5 billion in annual gas sales due to the stoppage. The company had already cut supplies to Austria’s OMV in November amid a contractual dispute. In recent weeks, Russian gas deliveries to Austria via Slovakia had averaged 200 gigawatt hours (GWh) per day, but only 7 GWh is expected on January 1, according to Austrian energy regulator E-Control.
Slovakia’s primary gas provider, SPP, announced it would primarily rely on supplies from Germany and Hungary, though additional transit costs are anticipated.
Declining Russian Exports
At its peak in 2018, Russian pipelines delivered a record 201 billion cubic meters (bcm) of gas to Europe. Since then, key routes like Nord Stream across the Baltic Sea to Germany have been disrupted, with the pipeline being sabotaged in 2022, while the Yamal-Europe pipeline via Belarus has also been shut down.
In 2023, Russia exported just 15 bcm of gas via Ukraine, a sharp decline from the 65 bcm transported annually under the five-year contract signed in 2020.
