Russian gas producer Gazprom stopped the transit of gas through Ukraine on Tuesday as the last day of a deal at transit supply point came to an end. This transit agreement had kept the black sea gas market operating for the last three years of the ongoing war in Ukraine. The prediction for the last gas supply line left for Europe is expected to be turned off by the 1st of January after the agreement to the five year deal expires marking an end for Moscow to dominate the European market.
Marking an end for Russia’s control in the European gas market as a result key markets impacted minimal
Despite the EU members seeking measures to reduce their reliance on Russian energy sources, it is anticipated that this is going to have limited market impacts. Russia’s ministry of energy has stated and assured that key markets under Slovakia, Czech Republic, and Austria have sufficient sources and expect no interruption. However the terminal interruption that this centre piece dominance took was but still selfualmente high, as the Quebec on the US regions alongside Norway began to dominate the subsequent energy supply landscape taking over Russia.
With the EU reducing its dependency for Russian gas after war : shifted revenue flows into other nations. Gazprom officially confirming it’s to be the largest gas exporter reported a £6.5 billion loss this year, coinciding with it being their first deficit since 1999.
Economic and Geopolitical Ramifications for Europe
For Europe, the unavailability of cheap Russian gas has led to a drastic decrease in economic productivity, inflationary pressures, and an intensification of the cost of living crisis. Though new forms of energy have been created all at once, the shift raised questions of Europe’s relative economic abilities. These concerns are especially pronounced in Germany, where the competitiveness of the foreign market has become increasingly complex for the manufacturing industry.
The Erosion of Russia’s Control Over Gas Supply
Russia, along with the Soviet Union, invested decades to build a stronghold of power over the gas market in Europe, a market which was contributing 35% towards EU supply at its peak. The war in Ukraine has dismantled a large part of this infrastructure. Major corridors including the Yamal–Europe pipeline, which runs through Belarus, and the Nord Stream, which runs under the Baltic Sea, have been rendered inoperative.
The Soviet-built pipeline located throughout Ukraine that is one of the last of the pipelines still in operation transported gas from Siberia through Sudzha in Russia’s Kursk region into Ukraine, then further to Slovakia. After which the pipeline branches to both Austria and Czech Republic.
Ukraine and Russia: No New Transit Deal
Discussion of extending the transit agreement has come to a halt with Ukraine now willing to negotiate. In effect, Ukraine is losing about $800 million worth of transit fees per year while Gazprom will lose about $5 billion in annual gas sales to Europe through this route.
However, analysts are confident that the end of the gas transit agreement will not re-collapse gas prices in the same exorbitant fashion witnessed in 2022 while the volume of data outflows may be relatively low, due to the disruption. In 2023, Russia only transferred roughly 15 billion cubic meters (bcm) of gas through Ukraine, which is only 8% of the volume reached between 2018 and 2019. On Tuesday, Gazprom’s sales were recorded at 37.2 million cubic metres (mcm) compared to 42.4 mcm a day before.
Broader Implications for the Region
The suspension of gas flow through Ukraine will have dire ramifications for Moldova which is a gas dependent ex soviet state. Another regional player Hungary, will still be able to get Russian gas through TurkStream which goes under the black sea, However, Budapest has shown a desire to still use the UKraine route when supplying the gas.
While Europe is transitioning into a new landscape that does not include Russian gas, this era marks the end of not only an energy policy but also an aspect as far as global politics are concerned, with consequences that extend to the economic and security order of the region in the long term.
