Ukraine Refuses to Renew Gas Transit Agreement-Halting Russian Gas Flow to Europe as 2024 Concludes
Ukraine recently declared that it would stop allowing Russia to transport Russian gas through its pipeline system to European countries once the five-year transit agreement with Russian energy company Gazprom expires at the end of this year.
This decision has raised concerns among European citizens and industries, which have been grappling with rising energy costs and diminished competitiveness since the EU began working to decrease its dependence on Russian gas & energy source following the Russia-Ukraine war. Despite the EU’s efforts, its reliance on Russian gas is expected to continue in the near future due to challenges like high energy prices, a slow economic recovery, and divisions within member states.
Ukrainian President Volodymyr Zelensky reiterated the country’s stance, amid this war, against extending the transit agreement after meeting with EU leaders in Brussels on December 19, emphasizing that the ban would apply to all gas flows “coming from Russia.” On the same day, Russian President Vladimir Putin confirmed that no new agreement would be made with Kyiv.
Currently, Russian gas transiting through Ukraine represents almost 35% of Russia’s pipeline exports to the EU. In 2023, around 15 billion cubic meters of gas were transported through Ukraine to Europe. Once the agreement ends, the Turkish Stream pipeline under the Black Sea will be the only remaining route for transporting Russian gas to Europe.
“Brussels is preparing for a shut-off, which is not something that comes as a surprise.”
European Commissioner for Energy and Housing Dan Jorgensen
Slovakia imports approximately 3 billion cubic meters of Russian gas through Ukraine each year, meeting nearly two-thirds of its demand. During Fico’s unexpected visit to Moscow on Sunday, Putin reportedly showed a willingness to keep supplying gas to Slovakia. However, Slovak Prime Minister Robert Fico acknowledged that this would be “practically impossible” without Ukraine renewing the transit agreement.
“If anyone is going to prevent the transit of gas to the territory of the Slovak Republic, if anyone is going to cause an increase in gas prices on the territory of Europe, if anyone is going to cause enormous economic damage to the European Union, it is President Zelenskyy,” Robert Fico- Slovak Prime Minister
Meanwhile, Hungary, which currently depends largely on the Turkish Stream for Russian gas imports, also emphasized the need to maintain the Ukrainian route to ensure supply security. Hungarian Prime Minister Viktor Orban stated that Hungarian officials are still negotiating with both Russia and Ukraine to ensure the continued flow of Russian gas through Ukraine.
“Each EU member state will be forced to seek solutions on its own,”- Croatian political analyst Robert Frank
“There is no contract, and it is impossible to conclude it in 3-4 days,” -Vladimir Putin, President, Russia
Ukrainian Route- Urengoy-Pomary-Uzhgorod pipeline
The Urengoy-Pomary-Uzhgorod pipeline, built during the Soviet era, transports gas from Siberia through the Russian town of Sudzha, which is currently under the control of Ukrainian forces in the Kursk region. The Russian gas then travels through Ukraine to Slovakia.
In Slovakia, the pipeline branches off to supply the Czech Republic and Austria.
The region where the end of gas transit could have a notably significant impact is Transnistria. In this area, the loss of 2 billion cubic meters of annual gas, which Gazprom has provided almost free of charge to support the breakaway region, could lead to economic losses and potentially cause instability.
In short term, Europe has to find alternative ways to close the 5% gas gap in this winter and In the long term, with the cessation of Russian gas supplies and the increasing availability of LNG from the US and Qatar, it is expected that LNG will play a much more significant role in European gas markets.
Turkey will become the sole entry point for Russian pipeline gas into the EU. There is a clear risk that Gazprom might not only utilize the 16 billion cubic meters capacity of the dedicated Turk Stream 2 pipeline but also the much larger Trans-Balkan pipeline for reverse flow. One major concern already raised is the labeling of gas coming from Turkey. The question is whether the gas is truly Turkish or if it is simply re-labeled gas from Gazprom. This issue is expected to gain increasing importance as the EU approaches its target of ending all Russian pipeline gas imports by April 2027.
President-elect Donald Trump’s stance on Ukraine will become clearer, and there may be openness to considering a minimum level of Russian gas flow through both the EU and Ukraine. However, the longer negotiations are delayed, the more likely it is that the transit of Russian gas through Ukraine will be permanently ended.