On New Year’s Day on Wednesday, the 1st of January, Russian gas exports through Soviet-era pipelines running through Ukraine were cut off, marking the end of Moscow’s decades-long dominance of European energy markets, reports Reuters and Politico.
Gas continued to flow despite nearly three years of war, but Russian gas company Gazprom said supplies were cut off when Ukraine refused to renew a transit contract.
Unlike in 2022, when a drop in Russian supplies led to record price hikes, deepened the cost of living crisis and affected EU competitiveness, this time the widely anticipated gas cut will have no impact on prices for EU consumers.
But Slovak PM Robert Fico has warned that ending Ukraine’s gas transit will hurt the EU but not Russia, raising energy costs and affecting Slovakia’s economy. Fico, who met Putin recently, alo has threatened to cut electricity exports to Ukraine if the deal isn’t extended.
The last remaining buyers of Russian gas in the EU via Ukraine, such as Slovakia and Austria, have agreed alternative supplies, while Hungary will continue to receive Russian gas via the TurkStream pipeline through the Black Sea.
But in Transnistria, a pro-Russian breakaway region neighbouring Moldova that also depends on transit flows, heating and hot water supplies to households were cut off early on Wednesday morning, causing an energy shortage in the dead of winter that risks a humanitarian crisis. The local energy company Tirasteploenergo urged people to dress warmly, cover windows and balcony doors with blankets or thick curtains and use electric heaters.
Ukrainian President Volodymyr Zelenskyy said in a Telegram message that the gas transit suspension through Ukraine to Europe is “one of Moscow’s biggest losses” and called on the US to supply more gas to Europe.
“The more gas we have on the market from Europe’s real partners, the sooner we will overcome the last negative consequences of Europe’s energy dependence on Russia,” he said
He wrote that Europe’s “common task” now is to support former Soviet Moldova “in this period of energy transformation”.
The European Commission said the EU was ready for this.
“Europe’s gas infrastructure is flexible enough to deliver gas that does not come from Russia,” a Commission spokesman said. “Since 2022, it has been reinforced by significant new LNG import capacity.”
Polish Foreign Minister Radosław Sikorski on Wednesday hailed the termination of the Russian gas deal as a “victory” for Kyiv.
“Putin spent billions to build Nordstream, bypassing Ukraine and blackmailing Eastern Europe with threats to cut off gas supplies. Today, Ukraine cut off his ability to export gas directly to the EU,” he wrote on X.
Poland also has said it is ready to export more electricity to Ukraine if Fico follows through on his threat.
Russia had worked for almost half a century to conquer the largest share of the European gas market, which peaked at around 35%. But since the outbreak of war in Ukraine, the EU has reduced its dependence on Russian energy, buying more gas through pipelines from Norway and LNG from Qatar and the US.
Ukraine, which refused to extend its transit contract, said Europe had already taken the decision to move away from Russian gas.
“We stopped the transit of Russian gas. This is a historic event. Russia is losing its markets, it will suffer financial losses,” Ukrainian Energy Minister German Golushchenko said in a statement.
Ukraine will increase gas transmission tariffs for domestic consumers to compensate for up to one billion US dollars a year in lost transit fees from Russia. This could cost Ukrainian industry more than 38 million US dollars a year.
Meanwhile, Gazprom will lose almost five billion US dollars from gas sales.
In November, Russia suspended gas supplies to Austria’s OMV, but supplies have been restored and will continue via Slovakia. Slovakia plans to supply gas via Germany and Hungary, with additional transit costs.
Russian gas pipelines delivered a record 201 billion cubic metres of gas to Europe in 2018.
In 2023, Russia supplied around 15 bcm of gas via Ukraine, compared to 65 bcm in 2020, when the last five-year contract started.