Russian gas supplies to European Union (EU) states via Ukraine ended on Wednesday as Ukraine’s gas transit operator Naftogaz refused to renew its latest five-year transit deal with Russia’s Gazprom. Under a five-year agreement signed in 2019, Ukraine allowed Russia to deliver gas through its territory to Europe. However, the agreement expired on January 1, with Kiev unwilling to extend it due to Moscow’s aggression.
Giving the EU a year to prepare, Ukrainian President Volodymyr Zelensky said his country would not allow Russia to “earn additional billions on our blood”.
Ukraine’s move is likely to affect eastern parts of Europe, including Austria and Slovakia, but Russia can still send gas to Hungary, Turkey and Serbia via the TurkStream pipeline across the Black Sea.
What impact will this move have on Russia?
Russia had spent half a century building its European gas market share, but its supplies to Europe fell dramatically after Moscow invaded Ukraine in February 2022, prompting the EU to cut its dependence on Russian gas. Inspired to.
At its peak, Russian gas accounted for about 35 percent of Europe’s supply, but since the beginning of the war this has fallen to about 8 percent. According to a Reuters report, as of December 1, the EU received less than 14 billion cubic meters (bcm) of gas from Russia through Ukraine, down from 65 bcm/year when the latest five-year contract began in 2020. Is.
EU gas prices set to hit record high in 2022 after Russian supply cuts. With supplies exhausted today, EU officials and traders believe a repeat of that rally is unlikely, given the modest volumes now involved and the low number of customers remaining.
Moscow has lost market share to rivals such as Norway, the United States and Qatar, with the European Commission saying the volumes could be entirely replaced by liquefied natural gas and non-Russian pipeline imports.
Who will be most affected?
The Ukraine route primarily serves Austria and Slovakia. Austria gets most of its gas through Ukraine, while Slovakia takes about 3 bcm from Gazprom per year, about two-thirds of its needs.
Austria decided to terminate its long-term contract with Gazprom in December. But Slovakia is impressed by the move, with its leader Robert Fico – one of the Kremlin’s few allies within the EU – expressing displeasure at Kiev’s decision.
“It is completely irrational and wrong to accept the Ukrainian president’s unilateral decision,” Mr Fico urged in a letter to Brussels, denouncing “a huge financial impact in a complex economic period”.
In response, the Slovak prime minister threatened to cut off electricity supplies, which Ukraine desperately needs, with Kiev’s own energy infrastructure damaged by nearly three years of systematic Russian bombardment.
Neighboring Hungary, on the other hand – which like Slovakia has been friendly towards Moscow – receives most of its Russian gas imports via the Black Sea Pipeline. As a result, Budapest will be largely unaffected by Ukraine’s decision.
But the situation is most serious in Moldova, which borders Ukraine and has to deal with Russia-backed separatists at home. The tiny country imposed a 60-day state of emergency earlier this month in anticipation of Kiev’s expected cuts, according to an AFP report.
Then on Saturday, Russia’s Gazprom announced it too would halt gas deliveries because of a dispute over a debt, prompting furious accusations from Moldova’s prime minister of “repressive tactics.”
Gazprom had already reduced its deliveries to Moldova since the beginning of the invasion, with the Russian company solely supplying the unrecognized breakaway state of Transnistria. But Moscow-backed power stations in the region still provide about two-thirds of the electricity consumed nationwide.
What options do EU buyers have?
Most other Russian gas routes to Europe are closed, including Yamal-Europe through Belarus and Nord Stream under the Baltic Sea. One option is the TurkStream pipeline under the Black Sea to Türkiye, Bulgaria, Serbia or Hungary. However, capacity is limited.
According to Austrian energy regulator E-Control, Slovakia’s gas supply could come from Hungary, about a third from Austria and the remainder from the Czech Republic and Poland. Its regulator has said Austria should not face disruption as it has prepared for supply changes.
The Czech Republic is likely to receive more supplies from German pipelines, taking advantage of an exemption from the German domestic gas levy from January 1. The Czech Republic has said it is ready to provide gas transit and storage capacity to Slovakia.
Russia supplies about 2 bcm of gas per year to Moldova. Moldovan Prime Minister Dorin Racine has said the country has diverse sources of supply. The country is planning measures to reduce consumption by at least a third from January 1.
The European Commission said that as far as Ukraine is concerned, its supply security will not be affected because it does not use Russian transit gas.
