Russian natural gas exports to Europe via Soviet-era pipelines through Ukraine were halted early on New Year’s Day as the transit agreement expired, with Moscow and Kyiv unable to reach a deal to maintain the flow amid their ongoing conflict.
This marks the end of Russia’s oldest gas route to Europe, capping a decade of strained relations that began with Russia’s annexation of Crimea in 2014. Ukraine ceased purchasing Russian gas the following year.
“We have stopped the transit of Russian gas. This is a historic moment. Russia is losing its markets and will face financial losses. Europe has already decided to move away from Russian gas,” Ukrainian Energy Minister German Galushchenko stated.
The cessation of gas flows was anticipated, given the ongoing war that began in February 2022. Ukraine firmly opposed extending the agreement during the conflict.
An industry source noted that Gazprom (MCX:GAZP) had already accounted for the end of gas transit via Ukraine in its plans last year. This route previously represented about half of Russia’s total pipeline gas exports to Europe.
Russia continues to export gas through the TurkStream pipeline across the Black Sea. TurkStream has two branches: one serving Turkey’s domestic market and the other supplying Central European countries such as Hungary and Serbia.
Since the outbreak of the war in 2022, the European Union has intensified efforts to reduce its reliance on Russian energy by diversifying its sources.
Remaining buyers of Russian gas via Ukraine, including Slovakia and Austria, have also secured alternative supplies.Moldova, a former Soviet Union member, is among the hardest-hit nations and has announced plans to reduce its gas consumption by one-third.
There were no immediate responses from Europe in the early hours of Wednesday regarding the situation.
The five-year gas transit agreement between Russia and Ukraine officially expired on January 1.
Gazprom stated via its Telegram channel: “Due to the repeated and explicit refusal of the Ukrainian side to renew these agreements, Gazprom no longer has the technical or legal capacity to supply gas for transit through Ukraine starting January 1, 2025.” The company confirmed that as of 8:00 a.m. Moscow time (0500 GMT), gas supplies for transit via Ukraine had ceased.
Ukraine’s energy ministry also announced that the transit of Russian gas through its territory had been halted “in the interests of national security.”
The cessation of the transit route will result in significant financial losses, with Ukraine losing an estimated $800 million annually in transit fees and Gazprom forfeiting nearly $5 billion in gas sales.
Alternative Routes
Russia, alongside the former Soviet Union, spent decades building a dominant presence in Europe’s gas market, supplying up to 35% at its peak. However, the ongoing war has largely dismantled Gazprom’s European business.
Other key gas routes have also ceased operations. The Yamal-Europe pipeline via Belarus has been shut down, while the Nord Stream pipeline across the Baltic Sea to Germany was sabotaged in 2022.
Collectively, these routes delivered a record 201 billion cubic meters (bcm) of gas to Europe in 2018. In contrast, Russia transported just 15 bcm of gas through Ukraine in 2023, a sharp decline from the 65 bcm delivered at the start of the last five-year agreement in 2020.
