Kyiv:
Russian gas supplies to the European Union (EU) states via Ukraine ended on Wednesday after Ukraine’s gas transit operator Naftogaz refused to renew its latest five-year transit deal with Russia’s Gazprom. Under a five-year deal signed in 2019, Ukraine had allowed Russia to pipe gas to Europe via its territory. However, the agreement expired on January 1, with Kyiv unwilling to extend it in the face of Moscow’s invasion.
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 set to affect Europe’s east, including Austria and Slovakia, but Russia could still send gas to Hungary, Turkey and Serbia, through the TurkStream pipeline across the Black Sea.
How Will The Move Affect Russia?
Russia had spent half a century building its European gas market share, but its supply to Europe suffered dramatically after Moscow invaded Ukraine in February 2022, which spurred the European Union to cut its dependence on Russian gas.
At its peak, Russian gas stood at about 35 per cent in Europe but has fallen to about 8 per cent since the start of the war. As of December 1, the EU received less than 14 billion cubic metres (bcm) of gas from Russia via Ukraine, down from 65 bcm/year when the latest five-year contract began in 2020, according to a report by Reuters.
EU gas prices rallied in 2022 to record highs after the loss of Russian supplies. With supplies ending today, EU officials and traders believe a repeat of that rally is unlikely given the now modest volumes involved and the small number of customers remaining.
Moscow has lost its market share to rivals such as Norway, the United States and Qatar, with the European Commission saying that volume can be fully replaced by liquefied natural gas and non-Russian pipeline imports.
Who Will Be Affected Most?
The Ukraine route majorly serves Austria and Slovakia. Austria receives most of its gas via Ukraine, while Slovakia takes around 3 bcm from Gazprom per year, about two-thirds of its needs.
Austria decided in December to terminate its long-term contract with Gazprom. But Slovakia is affected by the move, with its leader Robert Fico — one of the Kremlin’s few allies within the EU — crying foul over Kyiv’s decision.
“Accepting the unilateral decision of the Ukrainian president is totally irrational and wrong,” Mr Fico pleaded in a letter to Brussels, decrying “a major financial impact in a complicated economic period”.
By way of response, the Slovak prime minister threatened to cut off the supplies of electricity Ukraine desperately needs, with Kyiv’s own energy infrastructure battered by nearly three years of systematic Russian bombardment.
On the other hand neighbouring Hungary — which like Slovakia has remained friendly to Moscow — receives most of its Russian gas imports via the Black Sea pipeline. As a result, Budapest will remain largely unaffected by Ukraine’s decision.
But the situation is at its most critical in Moldova, which borders Ukraine and has to contend with Russian-backed separatists at home. The tiny nation had already introduced a 60-day state of emergency earlier this month in anticipation of Kyiv’s expected cut, according to a report by AFP.
Then on Saturday, Russia’s Gazprom announced it too would halt gas deliveries due to a dispute over debt, sparking furious accusations of “oppressive tactics” from Moldova’s prime minister.
Gazprom had already reduced its deliveries to Moldova since the beginning of the invasion, with the Russian company solely supplying the unrecognised breakaway state of Transnistria. But the Moscow-backed region’s power station still provides some two-thirds of the electricity consumed across the country.
What Option Do EU Buyers Have?
Most other Russian gas routes to Europe are shut including Yamal-Europe via Belarus and Nord Stream under the Baltic Sea. One option is the TurkStream pipeline to Turkey under the Black Sea, Bulgaria, Serbia or Hungary. However, capacity is limited.
Slovakia’s gas supply could come from Hungary, roughly a third from Austria and the remainder from the Czech Republic and Poland, according to Austrian energy regulator E-Control. Austria should not face disruptions as it has prepared for the switch in supply, its regulator has said.
The Czech Republic is likely to tap more supply from German pipelines taking advantage of an exemption from a German domestic gas levy from January 1. The Czech Republic has said it is ready to provide Slovakia with gas transit and storage capacities.
Russia supplies Moldova with about 2 bcm of gas per year. Moldovan Prime Minister Dorin Recean has said the country has diversified sources of supply. The country plans measures to reduce consumption by at least a third from Jan. 1.
As for Ukraine, its security of supply will not be impacted as it does not use Russian transit gas, the European Commission said.
