Ukraine Ends Supply of Russian Gas to Europe

  • Ukraine has made good on its promise to halt the transport of Russian gas to Europe through its territory after a key deal with Moscow expired on Wednesday. Ukraine’s refusal to renew the transit deal was an expected but symbolic move after nearly three years of its full-scale war with Russia and comes after Europe has already drastically cut Moscow’s share of its gas imports. Ukraine’s energy ministry said it ended the deal “in the interests of national security.”
  • However, Ukrainian President Volodymyr Zelensky called the move “one of Moscow’s greatest defeats. He accused Moscow of “turning energy into a weapon and engaging in cynical energy blackmail against its partners but expressed hope that the United States would increase its supply of gas to Europe.
  • Last year, Kremlin-owned gas giant Gazprom, which signed the transit deal with Ukraine’s Naftogaz in 2019, recorded a $6.9Bn loss, its first in more than 20 years, due to diminished sales to Europe. Ukraine now faces the loss of some $800Mn a year in transit fees from Russia, while Gazprom will lose close to $5 billion in gas sales.
  • Henning Gloystein, head of Energy, Climate & Resources at Eurasia Group, said the deal’s end came as “no surprise” but expects it to trigger a jump in spot gas prices when markets reopen on Thursday. However, a major price spike as seen during the previous Russian supply cuts is unlikely as EU importers have long prepared for this scenario. Further, most of Europe has had a mild start to winter.
  • Before Russia launched its full-scale invasion of Ukraine in 2022, Russia was the European Union’s biggest supplier of natural gas. The bloc has whittled Russia’s share of its pipeline gas imports down from over 40% in 2021 to about 8% in 2023, according to the European Council.
  • To fill the gap, Europe has imported vast quantities of liquefied natural gas (LNG) – a chilled, liquid form of natural gas that can be transported via sea tankers – from the United States and other countries, as well as pipeline gas from Norway. The EU has also ramped up imports of Russian LNG to help heat its homes and power its factories but faces a self-imposed deadline of 2027 and plans to break its dependence on all Russian fossil fuels.

(Source: CNN Business)