Tag: Russian

Kyiv/London
CNN
 — 

Ukraine has made good on its promise to halt the transport of Russian gas to Europe through its territory after a key deal with Moscow expired on Wednesday.

Ukraine’s refusal to renew the transit deal was an expected but symbolic move after nearly three years of its full-scale war with Russia, and comes after Europe has already drastically cut Moscow’s share of its gas imports. Ukraine’s energy ministry said it ended the deal “in the interests of national security.”

“We have stopped the transit of Russian gas. This is a historic event,” the ministry said in a statement, adding that its gas transportation infrastructure had been prepared in advance of the expiration.

Last year, Kremlin-owned gas giant Gazprom, which signed the transit deal with Ukraine’s Naftogaz in 2019, recorded a $6.9 billion loss, its first in more than 20 years, due to diminished sales to Europe, Reuters reported. That’s despite its efforts to boost exports to new buyer China.

Ukraine now faces the loss of some $800 million a year in transit fees from Russia, while Gazprom will lose close to $5 billion in gas sales, according to the news agency. Several European countries still purchasing Russian gas had previously arranged alternative supply routes, it reported.

The lapsed deal had represented about 5% of the European Union’s total gas imports, according to Brussels-based think tank Bruegel, and supplied mainly Austria, Hungary and Slovakia. Now, after its expiry, Europe receives pipeline gas from Russia via a single route: The Turkstream pipeline, which runs through Turkey and on to Bulgaria, Serbia and Hungary, says Bruegel.

Henning Gloystein, head of Energy, Climate & Resources at Eurasia Group, said the deal’s end came as “no surprise” but expects it to trigger a jump in spot gas prices when markets reopen on Thursday.

But “a major price spike as seen during the previous Russian supply cuts is unlikely as EU importers have long prepared for this (scenario),” he told CNN, adding that most of Europe has had a mild start to winter.

The European Union has been working with countries for over a year to prepare for the possibility of the deal’s expiry, a spokeswoman for the European Commission told CNN.

“The European gas infrastructure is flexible enough to provide gas of non-Russian origin to (central and eastern Europe) via alternative routes,” the spokeswoman said. “It has been reinforced with significant new (liquefied natural gas) import capacities since 2022.”

“We did our homework and were well prepared for this scenario,” Austria’s Energy Minister Leonore Gewessler said in a statement on X early Wednesday, adding that the country’s energy firms had sought out new, non-Russian suppliers.

However, Slovakia’s Prime Minister Robert Fico said on Wednesday that the halt of Russian gas flows via Ukraine will have a “drastic” impact on the EU but not on Russia, according to a Reuters report.

Fico has previously argued that the end of the deal would lead to higher gas and electricity prices in Europe, the news agency said.

Before Russia launched its full-scale invasion of Ukraine in 2022, Russia was the European Union’s biggest supplier of natural gas. The bloc has whittled Russia’s share of its pipeline gas imports down from over 40% in 2021 to about 8% in 2023, according to the European Council.

To fill the gap, Europe has imported vast quantities of liquefied natural gas (LNG) — a chilled, liquid form of natural gas that can be transported via sea tankers — from the United States and other countries, as well as pipeline gas from Norway. The EU has also ramped up imports of Russian LNG to help heat its homes and power its factories, but faces a self-imposed deadline of 2027 and plans to break its dependence on all Russian fossil fuels.

Analysts told CNN last month that countries receiving Russian gas through the transit deal with Ukraine are not at risk of an energy shortage and would likely fill the gap by importing more LNG or more natural gas via pipeline from other European nations.

Still, Massimo Di Odoardo, a senior natural gas researcher at energy data firm Wood Mackenzie, told CNN in late December that the deal’s expiry would make it harder for Europe to refill its stores before next winter. That’s one reason why European gas prices are likely to remain close to their current levels or perhaps rise in 2025, he said.

Prices have tumbled from all-time highs reached in summer 2022 but are still more than double their historical levels.

There are already signs of strain in the region. Reuters reported on Wednesday that Transdniestria, a breakaway region of Moldova, a non-EU country that also receives Russian gas via Ukraine, had cut heating and hot water supplies to households following the expiry of the transit deal.