MOSCOW/KYIV – In the early hours of New Year’s Day, Russian natural gas exports through Soviet-era pipelines running via Ukraine to Europe were halted as the transit deal between the two nations expired without a new agreement in place.
This shutdown marks the end of a decade of strained relations, initially sparked by Russia’s annexation of Crimea in 2014, and follows Ukraine’s cessation of Russian gas purchases in 2015. Ukraine’s Energy Minister German Galushchenko declared, “We stopped the transit of Russian gas. This is a historic event. Russia is losing its markets, it will suffer financial losses. Europe has already made the decision to abandon Russian gas.”
The expiration of the five-year gas transit deal on January 1 was anticipated amidst the ongoing war that began in February 2022. Ukraine has been resolute in its decision not to extend the agreement during the conflict.
Gazprom, Russia’s energy giant, had anticipated the cessation of gas transit via Ukraine in 2024, which accounted for roughly half of Russia’s total pipeline gas exports to Europe. While Russia continues to export gas via the TurkStream pipeline, the European Union has intensified efforts to reduce its reliance on Russian energy since the outbreak of the war.
Countries such as Slovakia and Austria, which were previously reliant on Russian gas via Ukraine, have arranged alternative supplies. Moldova, among the worst affected, announced measures to reduce its gas consumption by a third.
Gazprom stated that Ukraine’s refusal to renew the transit agreements deprived the company of the technical and legal ability to supply gas through Ukrainian territory from January 1, 2025. Ukraine’s Energy Ministry cited national security concerns for halting the gas transportation.
As a result, Ukraine faces a loss of approximately $800 million annually in transit fees, while Gazprom stands to lose nearly $5 billion in gas sales. The war has severely impacted Gazprom’s business, which once held a major share of the European gas market.
In 2023, Russia shipped about 15 billion cubic meters (bcm) of gas via Ukraine, significantly down from 65 bcm when the last five-year contract began in 2020.