Russian Gas Exports to Europe via Ukraine Halted

The gas supply to Europe via Ukraine, Russia’s oldest gas route to Europe operational for over 40 years, ceased on January 1, 2025, after Ukraine’s Naftogaz refused to renew its five-year transit deal with Gazprom.

• The decision comes amid ongoing war between Russia and Ukraine, which began in February 2022, and decades of tension following Russia’s annexation of Crimea in 2014.

About the Ukraine Gas Route

• The Soviet-era Urengoy-Pomary-Uzhgorod pipeline brings gas from Siberia via the town of Sudzha – which is now under the control of Ukrainian military forces  in Russia’s Kursk region. 
• It then flows through Ukraine to Slovakia.
• In Slovakia, the gas pipeline splits into branches going to the Czech Republic and Austria.

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Implications of the Halt

• Declining Volumes: Russia once supplied 35% of Europe’s gas, with a peak delivery of 201 billion cubic meters (bcm) in 2018.
  • By 2023, supplies through Ukraine dwindled to 15 bcm, a significant drop from 65 bcm in 2020.
• Financial Implications: Russia is set to lose about $5 billion annually in gas sales through Ukraine.
• • Ukraine will lose approximately $800 million to $1 billion in transit fees each year.
• Countries Most Affected
  • Austria previously relied heavily on the Ukrainian transit route but has diversified its gas sources and prepared for the transition.
  • Slovakia, which received about two-thirds of its gas from Gazprom, has secured alternative contracts with global suppliers like BP, Eni, ExxonMobil, RWE, and Shell.
  • Moldova faces significant challenges, relying on Russia for 2 bcm of gas per year, much of which is used in the breakaway region of Transdniestria to generate power.
    • The Moldovan government plans to reduce gas consumption by one-third and seek alternative energy sources.

Alternative Supply Sources for Europe

• Diversification: The European Union has drastically reduced its dependence on Russian gas, leveraging alternatives like:
  • Liquefied Natural Gas (LNG) from the United States, Qatar, and other countries.
  • Pipeline imports from Norway and North Africa.
• Remaining Routes: Other major Russian gas routes, such as Yamal-Europe (via Belarus) and Nord Stream (via the Baltic Sea), are no longer operational.
  • The TurkStream pipeline remains an option, supplying gas to Turkey and parts of Central Europe, but capacity is limited.
• Strategic Adjustments in Europe
  • Infrastructure and Collaboration: Slovakia could receive gas supplies from Hungary, Austria, the Czech Republic, and Poland.
  • The Czech Republic is prepared to provide Slovakia with transit and storage capacity.
  • EU’s Assurance: The European Commission stated that Ukraine’s gas supply security would remain unaffected, as it no longer uses Russian transit gas.

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Long-Term Consequences

• Russia’s Declining Influence: Russia’s market share in Europe has plummeted to 8% from 35%, marking a significant loss of influence.
  • Moscow now faces competition from LNG suppliers and pipeline exporters, which have captured its former market share.
• Energy Security in Europe: The EU’s push for energy independence has been accelerated, with long-term diversification strategies likely to make Russian gas exports to Europe increasingly irrelevant
• Global Impact: This could potentially raise energy costs for vulnerable regions reliant on Russian gas, such as parts of Asia and Eastern Europe.