Importance Score: 75 / 100 🔴
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Amidst ongoing hostilities, Ukraine has persisted in transporting Russian natural gas to European consumers.
However, this agreement, established following the dissolution of the Soviet Union, has now ceased.
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The expired transit deal was anticipated to generate approximately $5 billion for Russia in 2024, with Ukraine earning up to $1 billion.
Russia can no longer transport natural gas to Europe via Ukraine’s pipelines following the end of a five-year arrangement on Wednesday. This deal was negotiated before the conflict commenced.
The termination of this enduring arrangement signifies the cessation of Ukraine’s role as a key conduit for Russian gas bound for Europe, an accord that persisted even after full-scale combat erupted in 2022.
Nations such as Slovakia and Austria, which previously received this gas, compensated Russia for the energy supplied.
In December, a projection indicated that the Russian economy would amass around $5 billion in 2024 solely from transporting gas through Ukraine.
Furthermore, it was estimated that Ukraine would accrue $800 million to $1 billion annually from collecting transit fees.
Ukraine Timeline For The Expired Natural Gas Agreement
- Ukraine has consistently indicated its intention to allow the transit deal to expire on January 1, 2025, and it has now followed through on this pledge.
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“When Putin assumed the Russian presidency over 25 years ago, the annual gas transit through Ukraine to Europe exceeded 130 billion cubic meters. Today, it stands at zero,” stated Ukrainian President Volodymyr Zelenskyy.
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Ukraine’s energy minister, Herman Halushchenko, attributed the cessation of the transit deal to national security considerations.
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Russian gas behemoth Gazprom confirmed on Wednesday that energy shipments through Ukraine had ceased, citing “repeated and explicit rejection by the Ukrainian party to extend these agreements.”
Russia Seeks Alternate Routes for Natural Gas to Europe
The now-lapsed agreement exposed the intricacies of the ongoing war and its political ramifications in Europe. With European Union member states endeavoring to decrease their dependence on Russian energy, they have concurrently supplied arms to Ukraine and endeavored to impose sanctions on Moscow.
Amidst intense fighting in Luhansk, Donetsk, Kharkiv, and Kursk, gas flowing through these regions enabled both Kyiv and Moscow to profit from each other’s resources and infrastructure.
The Gas Transit Route Since 1991
Ukraine has channeled Russian natural gas to Europe since the Soviet Union’s collapse in 1991. Initially, energy consumers voiced apprehensions about finding alternative supplies promptly if the deal lapsed.
Slovakia’s President Robert Fico condemned Kyiv’s decision in a New Year’s address, asserting that discontinuing cheap Russian gas exports to Europe would significantly impact EU nations but would not adversely affect Russia.
Meanwhile, Austria severed ties with Gazprom in December, accusing Russia of leveraging energy as a bargaining chip over European support for Ukraine by coercing Austrian gas company OMV.
The loss of Austria as a clientele further hindered Moscow’s gas industry as Europe transitions away from Russian energy supplies.
Reduced Dependency On Russian Natural Gas
In March, the EU disclosed that around 8% of its natural gas originated from Russia in 2023, a notable decrease from the 40% recorded in 2021.
Since the conflict commenced, the U.S. and Norway have emerged as significant beneficiaries among natural gas providers. The EU reported that gas imports from the U.S. in 2023 had tripled since 2021, accounting for nearly 20% of the union’s natural gas procurements.
Hungary’s Reliance on Russian Energy
Within Europe, countries like Hungary—an EU member led by a president who maintains close ties with Moscow—continue to access Russian gas via the TurkStream pipeline, which traverses the Black Sea to the Balkans.
Moldova, a non-EU member state, along with its separatist-controlled region, Transnistria, are anticipated to be severely impacted by the termination of the Ukraine-Russia deal. The country’s largest power plant has historically relied on Russian natural gas.