Ukraine Ends Russian Gas Transit, Reshapes Energy Markets

Why in the news?

Ukraine halted Russian gas transit to Europe on January 1, 2025, ending decades of supply dominance. This move, driven by Europe’s reduced reliance on Russian energy, impacts Ukraine’s revenue and Russia’s market share significantly.

Ukraine Halts Russian Gas Transit to Europe:

  • On January 1, 2025, Ukraine ceased the transit of Russian gas to Europe, ending Russia’s decades-long dominance in Europe’s energy markets.
  • The decision came after Ukraine declined to renew its transit agreement with Russia’s Gazprom, which halted flows via Soviet-era pipelines at 0500 CMT.
  • European gas prices are not expected to spike as alternatives like LNG from the US and Qatar, and piped gas from Norway, are already in place.

Impact on Ukraine and Russia

  • Ukraine faces an annual loss of $1 billion in transit fees and will increase gas transmission tariffs for domestic consumers, costing its industries $380 million annually.
  • Gazprom could lose $5 billion in annual gas sales due to halted exports to key buyers like Austria, where gas flows have dropped significantly.
  • Transdniestria, a pro-Russian region in Moldova, has already cut heating and hot water supplies due to the disruption.

Europe’s Shift Away from Russian Gas

  • The EU has diversified its energy sources, reducing dependency on Russian gas since the start of the Ukraine war in 2022.
  • New LNG import facilities and increased gas supplies from Norway, Qatar, and the US have strengthened Europe’s energy resilience.
  • Remaining Russian gas flows to Hungary continue through the TurkStream pipeline, while Slovakia and Austria have secured alternative supplies from Germany and Hungary.
  • Ukraine’s Energy Minister hailed the move as historic, signaling Russia’s diminished influence in European energy markets.

Sources Referred:

PIB, The Hindu, Indian Express, Hindustan Times