Russian energy company Gazprom announced that today (31.12.2024), the last day before the end of the agreement with which it had maintained its flow during nearly three years of war, will channel a reduced gas volume to Europe via Ukraine. Gas flow is likely to stop on 1 January after the end of the five-year transit agreement between Russia and Ukraine, marking the almost complete loss of Moscow’s once powerful influence on the European gas market. Unless there’s a deal – last-minute surprise. CORVERSE Russian President Vladimir Putin had stated on 26 December, that there was no time left this year to sign a new gas transit agreement through Ukraine. Slovakia and Austria which still buy Russian gas have taken care to secure alternative supplies, while analysts predict that the impact of stopping the flow of Russian gas will have little impact on the market. The price at Title Transfer Facility, a virtual trading point in the Netherlands used as a benchmark for European gas prices, increased only slightly today Tuesday to EUR 48.85 per megawatt hour and earlier had exceeded the threshold of EUR 50, at its highest level since October 2023. CORVERSE The interruption of the gas flow would have a much greater geopolitical significance. Moscow has lost its decisive share in the supply of countries in the European Union in relation to its opponents such as the United States, Qatar and Norway since it invaded Ukraine in 2022, which prompted the EU to stop its dependence on Russian gas. The state-owned company Gazprom, once the world’s largest exporter of gas, only in 2023 suffered losses of $7 billion and were the first annual losses recorded since 1999. For Europe, the loss of cheap Russian gas contributed to a significant economic slowdown, an increase in inflation and a deterioration in the cost of life crisis. Although Europe has rushed to find alternative sources of energy, the loss of Russian gas has exacerbated long-term concerns about reducing its global competitiveness and in particular Germany’s industrial future. The Impact of War in Ukraine Russia and the Soviet Union spent half a century acquiring a significant share of Europe’s gas market, which reached 35% at its height, but the war in Ukraine destroyed almost this business activity for Gazprom. Most natural gas routes to Europe have stopped including the Yamal-Europe route through Belarus and the underwater Nord Stream pipeline through the Baltic Sea which exploded in 2022. The pipeline built in Soviet times carries through Ukraine and specifically through the city of Sunja which is now under the control of Ukrainian soldiers, natural gas in the Kursk region of Russia. It is then channelled through Ukraine to Slovakia. In Slovakia, the gas pipeline is divided into branches headed for the Czech Republic and Austria. Kiev has refused to negotiate a new transit agreement. Ukraine will lose approximately $800 million it receives annually as a fee from Russia, while Gazprom will lose nearly $5 billion from gas sales to Europe via Ukraine. The end of the transit agreement is unlikely to cause a recurrence of the EU gas price rally, as the remaining quantities are relatively small. Russia sent about 15 billion cubic metres (bcm) of natural gas through Ukraine in 2023 – only 8% of the maximum flow of Russian gas to Europe through various routes in 2018-2019. Gazprom said she would send 37.2 million cubic metres today compared to 42.4 million cubic metres she sent yesterday (30.12.2024). Stopping supplies through Ukraine will be a major blow for Moldova, a country that once formed part of the Soviet Union. Hungary will continue to receive Russian gas from the south, via the Black Sea TurkStream underwater pipeline, although it also wished to maintain the Ukrainian route.
Russia reduces gas flows to Europe the day before the agreement with Ukraine expires
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