Russia cuts gas supplies to Europe via Ukraine on last day before deal expires - Reuters
Kyiv • UNN
Russia stops supplying gas through Ukraine after the transit agreement expires on January 1. Europe has found alternative sources, but the loss of Russian gas has affected the EU economy.
Russian energy company Gazprom said it will supply less gas to Europe through Ukraine on Tuesday, the last day before the expiration of an agreement that has secured gas supplies for nearly three years of war, Reuters reports, UNN writes.
Details
"Barring an unexpected last-minute deal, gas supplies are likely to end on January 1 after the expiration of the five-year transit agreement between Russia and Ukraine, marking the almost complete loss of Moscow's once powerful influence on the European gas market," the article says.
Russian dictator Vladimir Putin said on December 26 that there was no time left this year to sign a new agreement on gas transit through Ukraine.
Buyers of Russian gas, such as Slovakia and Austria, have agreed on alternative supplies, and analysts predict minimal impact on the market from the suspension of Russian gas supplies, the newspaper writes.
The price of the Title Transfer Facility, a virtual trading point in the Netherlands used as a benchmark for European natural gas prices, rose only slightly on Tuesday to 48.85 euros per megawatt hour by late morning.
As noted, the stoppage of gas supplies was of much greater geopolitical importance.
According to the newspaper, Moscow lost its dominant share of gas supplies to the EU to competitors such as the United States, Qatar, and Norway after the invasion of Ukraine in 2022, prompting the EU to reduce its dependence on Russian gas.
Once the world's largest gas exporter, the state-controlled Gazprom recorded a loss of $7 billion in 2023 alone, its first loss in a year since 1999.
For Europe, the loss of cheap Russian gas supplies has contributed to a serious economic slowdown, a surge in inflation, and a worsening cost-of-living crisis, the publication notes.
While Europe has reportedly been quick to find alternative energy sources, the loss of Russian gas has exacerbated long-term concerns about its declining global competitiveness and, in particular, Germany's industrial future.
"Russia and the Soviet Union spent half a century building up a significant share of the European gas market, which at its peak amounted to 35%, but the war in Ukraine has virtually destroyed this business for Gazprom," the newspaper writes.
Most of Russia's gas routes to Europe are reportedly closed, including Yamal-Europe through Belarus and Nord Stream under the Baltic Sea, which was blown up in 2022.
The Soviet pipeline through Ukraine brings gas from Siberia through the city of Sudzha in the Kursk region of Russia. It then goes through Ukraine to Slovakia. In Slovakia, the pipeline splits into branches that go to the Czech Republic and Austria.
Kyiv refuses to negotiate a new transit agreement.
Ukraine is giving up about $800 million a year in fees from Russia, while Gazprom will lose about $5 billion in gas sales to Europe through Ukraine.
The end of the transit agreement is unlikely to lead to a repeat of the 2022 gas price increase in the EU, as the remaining volumes are relatively small, the publication points out.
Russia will supply about 15 billion cubic meters of gas through Ukraine in 2023, only 8% of the peak flows of Russian gas to Europe via various routes in 2018-2019.
"Gazprom said it would ship 37.2 million cubic meters on Tuesday, down from 42.4 million cubic meters on Monday.
The cessation of supplies through Ukraine will be a serious blow to Moldova, the newspaper notes.
Hungary will continue to receive Russian gas from the south through the Turkish Stream pipeline under the Black Sea, although it also sought to preserve the Ukrainian route, the newspaper notes.
