Ukraine Halts Russian Gas Supply To Europe In Major Energy Shift

Ukraine has fulfilled its pledge to stop the transport of Russian gas to Europe through its territory following the expiration of a key agreement with Moscow on Wednesday.

Ending the transit deal, which had been in place since 2019, marks a significant step for Ukraine amidst nearly three years of full-scale conflict with Russia. Ukraine’s energy ministry stated that the decision was made “in the interests of national security.”

“This is a historic event,” the ministry announced, adding that its gas transportation infrastructure had been prepared for the change well in advance of the deal’s expiration.

Financial Impacts on Both Sides

The termination of the agreement is expected to have major financial consequences. Last year, Gazprom, Russia’s state-controlled gas company, reported its first loss in over 20 years, amounting to $6.9 billion, due to reduced gas exports to Europe. While Gazprom has tried to offset these losses by increasing sales to China, the end of the transit deal will cost the company nearly $5 billion in lost gas sales, according to reports.

Ukraine, on the other hand, will lose approximately $800 million annually in transit fees previously paid by Russia.

Some European nations that had relied on the pipeline for Russian gas — including Austria, Hungary, and Slovakia — had already secured alternative supply routes, minimizing disruption.

Reduced Dependence on Russian Gas

The now-expired deal accounted for about 5% of the European Union’s total gas imports, according to data from Brussels-based think tank Bruegel. With the agreement ending, the EU now receives Russian pipeline gas solely via the TurkStream pipeline, which runs through Turkey to Bulgaria, Serbia, and Hungary.

The European Union has been preparing for this scenario for over a year. The EU significantly increased its import capacity for liquefied natural gas (LNG) and bolstered alternative pipeline connections to reduce dependence on Russian energy.

Austria’s Energy Minister Leonore Gewessler reassured citizens, stating that the country had proactively secured new, non-Russian gas suppliers.

Potential Challenges Ahead

Despite these preparations, concerns remain. Slovakia’s Prime Minister Robert Fico warned that the halt in Russian gas flows via Ukraine could have a “drastic” impact on the EU, potentially leading to higher gas and electricity prices across the region.

The EU has already made significant progress in reducing its reliance on Russian gas, cutting its share of pipeline gas imports from over 40% in 2021 to about 8% in 2023. However, analysts have noted that the expiration of the Ukraine transit deal could make it harder for Europe to replenish its gas reserves before the next winter season.

Rising Gas Prices

While gas prices have dropped significantly since their peak in summer 2022, they remain more than double their historical averages. Experts predict that prices could stay elevated or even rise further in 2025, adding pressure to European consumers and industries.

Reports have also indicated early signs of strain in the region. Transdniestria, a breakaway region of Moldova that still receives Russian gas via Ukraine, has already reduced heating and hot water supplies to households following the expiration of the transit deal.

The Broader Energy Shift

The end of the Ukraine transit deal underscores Europe’s ongoing shift away from Russian energy. In addition to ramping up imports of LNG from the United States and pipeline gas from Norway, the EU has committed to phasing out all Russian fossil fuels by 2027.

This decisive move by Ukraine is both a symbolic and practical step in the context of its conflict with Russia, as well as Europe’s broader strategy to diversify its energy sources and enhance energy security across the region.