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The Mitte Combined Heat and Power (CHP) natural gas power plant, operated by Vattenfall AB, in Berlin, Germany, on Wednesday, January 1, 2025.
Bloomberg | Bloomberg | Getty Images
Ukraine halted the flow of Russian gas to several European countries on New Year’s Day, ending Moscow’s decades-long dominance of European energy markets.
Gazprom, Russia’s state energy giant confirmed Gas exports to Europe via Ukraine stopped around 8am local time (5pm London time) on Wednesday.
The widely expected move marks the end of a five-year transit agreement between Russia and Ukraine, with neither side willing to strike a new deal in the interim ongoing war.
Ukrainian President Volodymyr Zelenskyy said last month that Kiev was not prepared to extend the transit of Russian gas, adding: “We will not give the possibility of additional billions to be earned on our blood.”
Russia, which has transported gas to Europe via Ukrainian pipelines since 1991, says European Union countries will suffer the most from the supply shift. Moscow can also send gas via the TurkStream pipeline, which connects Russia with Hungary, Serbia and Turkey.
Ukraine will lose up to $1 billion a year in transit fees from Russia due to the shutdown, according to Reuterswhile Gazprom is ready to lose close to $5 billion in gas sales.
The European Commission, the executive arm of the EU, he said had worked with the EU member states most affected by the end of the gas transit agreement to ensure that the entire 27-nation bloc was prepared for such a scenario.
SlovakiaAustria is Moldova are among the countries most at risk from the stoppage. They were the European countries most dependent on Russian gas transit volumes in 2023, according to Rystad Energywith Slovakia importing about 3.2 billion cubic meters that year, Austria getting 5.7 billion cubic meters and Moldova getting 2 billion cubic meters.
In this pool photo released by Russian state news agency Sputnik, Russian President Vladimir Putin (R) shakes hands with Slovak Prime Minister Robert Fico (L) before their talks in Moscow on December 22, 2024 .
Gavriil Grigorov | Afp | Getty Images
Austria insisted that it is well prepared for the arrest, but others were much more worried.
Slovakia’s Prime Minister Robert Fico warned that Ukraine’s termination of the gas transit agreement had a “drastic“impact on the EU, without harming Russia. I am also threatened to cut the supply of electricity to neighboring Ukraine.
The prime minister, a vocal critic of the EU’s support to Ukraine in the ongoing war, made a surprise visit to Moscow for talks with Russian President Vladimir Putin just before Christmas.
Moldova, which is not a member of the EU, stated a 60-day state of emergency last month over energy security fears.
A total of 56 lawmakers in Moldova’s 101-seat parliament voted in favor of a national state of emergency, which the government said at the time would allow the country to implement a series of measures to prevent and mitigate the threat of insufficient energy resources.
“A historic event”
Ukrainian Energy Minister Herman Galushchenko described the cessation of Russian gas flows via Ukraine as a “historic event”.
“Russia is losing markets, will suffer financial losses,” Galushchenko said via Telegram on January 1, according to a Google translation.
“Europe has already decided to abandon Russian gas. And the European initiative Repower EU provide exactly what Ukraine has done today,” he added.
Separately, the Polish Minister of Foreign Affairs Radek Sikorski greeted the development as a political victory, accusing Russia’s Putin of trying to “recruit Eastern Europe with the threat of cutting off gas supplies.”
Steam clouds from the OMV refinery plant rise into the morning sky in the suburban town of Schwechat, Austria, on November 18, 2024.
Joe Klamar | Afp | Getty Images
The latest data compiled by the industry group Gas Infrastructure Europe shows EU gas storage facilities are around 73% full. In Germany, Europe’s largest economy and the largest consumer of gas, inventories are currently at almost 80%.
“Without Azerbaijan or another third party transiting gas after an exchange agreement with Russia, the EU will need about 7.2 [billion cubic meters] of gas to be purchased from the LNG market,” said Christoph Halser, gas and LNG analyst at Rystad Energy, in a research note.
“Terminals in Poland, Germany, Lithuania and Italy could transmit these volumes to the most affected counties, such as Slovakia and Austria.”
Europe’s energy security
Henning Gloystein, practice leader of the energy, climate and resources team at Eurasia Group, said that Ukraine’s decision to stop the flow of Russian gas to the EU is not a surprise, as Kiev and Moscow they have long stated that they will not be willing to renew an agreement. in the present conditions of war.
In a research note, Gloystein said the expiry of the agreement does not threaten the EU’s winter energy security, citing steps taken by EU importers to prepare for supply cuts and climate mild winter seen in most of Europe.
Gloystein of the Eurasia Group said that gas price movements in the coming months will likely depend on political developments in the Russia-Ukraine war and the remaining winter weather conditions.
“On the political front, there are ongoing discussions between some EU members (e.g. Slovakia, where many Ukrainian pipelines enter the EU), Russia and Ukraine to find a compromise that can allow a recovery of supplies. no progress during the negotiations around the turn of the year,” said Gloystein.
“On the climate front, expectations are currently for above-average temperatures for the remainder of the winter in Europe, implying that the impact of the cuts will be limited,” he added.
The first-month gas price at the Dutch central TTF, a European benchmark for natural gas trading, was last seen down 1.2% at 49.49 euros ($51.1) per megawatt – now Thursday, according to New York Intercontinental Exchange.
