Russian Gas Transit via Ukraine Ends as Deal Expires Amid Conflict

What’s in today’s article?

• Why in News?
• Urengoy-Pomary-Uzhgorod Pipeline Overview
• Volume of gas supplied through Ukraine
• Possible impact
• Options available to the buyers

Why in News?

On New Year’s Day, Russian natural gas exports to Europe via Soviet-era pipelines through Ukraine were stopped as the transit deal expired, with no agreement reached between Moscow and Kyiv. This marks the end of Russia’s oldest gas route to Europe.

The Ukrainian government justified its decision as necessary for national security amid the military conflict.

Urengoy-Pomary-Uzhgorod Pipeline Overview

• The pipeline transports gas from Siberia through Sudzha, located in Russia’s Kursk region, now under Ukrainian military control.
• It flows through Ukraine to Slovakia, branching into the Czech Republic and Austria.
• Transdniestria, bordering Ukraine, receives Russian gas via Ukraine.

Volume of gas supplied through Ukraine

• Decline in Russia’s Gas Exports to Europe
  • Russia’s gas supply to Europe has drastically reduced since the invasion of Ukraine in February 2022.
  • Moscow’s share of the European gas market, once 35%, has dropped to 8%.
• Diminished Gas Transit via Ukraine
  • By December 2024, the EU received less than 14 bcm of gas via Ukraine, a sharp decline from 65 bcm/year in 2020.
  • Ukraine earns $800 million to $1 billion annually in transit fees, while Russia could earn approximately $5 billion from sales via Ukraine in 2024.
• Europe’s Energy Diversification
  • The European Union has offset the loss of Russian gas with liquefied natural gas (LNG) and non-Russian pipeline imports.
  • Competitors like Norway, the United States, and Qatar have gained market share at Russia’s expense.

Possible Impact

• Impact on Russia and Gazprom
  • Economic Losses: Ukraine faces a loss of $800 million annually in transit fees, while Gazprom loses nearly $5 billion in gas sales.
  • Decline in Gas Exports: Russian gas transit through Ukraine fell from 65 bcm in 2020 to about 15 bcm in 2023.
  • Collapse of European Market Share: At its peak, Russia controlled 35% of Europe’s gas market, but the war has significantly eroded this dominance.
• Impact on EU
  • Countries affected
    • The Ukraine route serves Austria and Slovakia. Austria received most of its gas via Ukraine, while Slovakia takes around 3 bcm from Gazprom per year, about two-thirds of its needs.
    • Slovakia has said the loss of Russian supply would not hit its consumption and that it has diversified supply contracts.
    • Ukraine’s gas supply remains unaffected as it no longer relies on Russian transit gas.
• Market Impact
  • EU gas prices reached record highs in 2022 but are unlikely to repeat due to the small remaining volumes of Russian gas and reduced dependency.
  • The European Union has offset the loss of Russian gas with liquefied natural gas (LNG) and non-Russian pipeline imports.
  • Competitors like Norway, the United States, and Qatar have gained market share at Russia’s expense.

Options available to the buyers

• Shutting Down Other Pipelines
  • Yamal-Europe Pipeline: Closed via Belarus.
  • Nord Stream Pipeline: Severely damaged in 2022.
• Alternative Routes and Adjustments
  • TurkStream Pipeline: Russia continues to export gas via TurkStream, supplying Turkey, Hungary, and Serbia.
  • European Union’s Shift: EU countries have diversified their energy sources to reduce dependency on Russian gas since 2022.
    • Slovakia: Diversifies gas supply from Hungary, Austria, the Czech Republic, and Poland.
    • Austria: Secured alternative supplies and prepared for the transition.
    • Czech Republic: Tapping into German pipelines, exempt from German gas levies, and supporting Slovakia with transit and storage capacities.
  • Moldova’s Challenges: Moldova, severely affected, plans to cut gas usage by a third.
    • Moldova receives 2 bcm of gas annually from Russia via Ukraine for Transdniestria, which generates power for the rest of Moldova.
    • Moldova has diversified its sources and will reduce gas consumption by a third starting January 1.

Q.1. Why did Russian gas transit via Ukraine stop?

The transit deal expired on January 1, 2025, without renewal due to ongoing conflict. Ukraine halted the pipeline citing national security, ending Russia’s oldest gas route to Europe.

Q.2. How is the EU mitigating the loss of Russian gas?

The EU offsets Russian gas losses through LNG imports and non-Russian pipelines. Countries like Norway, the US, and Qatar have gained market share, while Europe transitions to diversified and sustainable energy sources.

Source: IE | ET