Russian gas exports to Europe: Natural gas flows via Ukraine halted as deal ends
Russian fuel shipments to several European countries were cut off on New Year’s Day after Ukraine refused to renegotiate a transit deal amid the war with Moscow.
Ukraine’s reluctance to renew the five-year transit deal is aimed at depriving Russia of profits that Moscow can use to fund its war, but the move will most likely create an energy crisis in Eastern Europe, Transnistria – a Moldovan separatist region – by cutting off the heat. and family hot water supply.
“This definitively ends what was once Russia’s dominance in the EU energy market,” said Al Jazeera’s Jonah Hull, reporting from kyiv, Ukraine’s capital. Before the invasion of Ukraine in 2022, Russia supplied around 35% of European vegetable fuel exports via pipelines.
With the shutdown of Russia’s oldest gas route to Europe, functional for more than 40 years, Russia’s share has dwindled to less than 10 percent. Another gas pipeline passing through Turkiye still supplies gas to countries such as Hungary.
So what will it be like to turn off the taps at the height of the winter season in countries, especially those in Eastern Europe, and what may happen next?
Russian energy giant Gazprom said on Wednesday that gas supplies to Europe had been halted at 8am local time (05:00 GMT) after Ukraine’s state-owned oil and gas company Naftogaz refused to renew its latest five-year transit deal.
On Wednesday, Ukraine’s Energy Minister German Galushchenko said in a statement, “We stopped the transit of Russian gas. This is an historic event. Russia is losing its markets, it will suffer financial losses. Europe has already made the decision to abandon Russian gas.”
The latest contract was first signed in 2020 under which Ukraine was paid transport fees. But Ukrainian President Volodymyr Zelenskyy had warned that Kyiv would not renew the transit agreement amid the continuing war.
Many European countries began to reduce their reliance on Russian gas after Moscow’s invasion of Ukraine in February 2022.
At its peak, Moscow’s share of European fuel imports was 35 percent, but it has fallen to around 8 percent.
The European Union obtained less than 14 billion cubic meters (bcm) of fuel from Russia and Ukraine as of December 1, compared to 65 billion cubic meters a year at the start of the contract in 2020.
The gas is transported via the Soviet-era Urengoy-Pomary-Uzhgorod pipeline from Siberia through Sudzha, a city in Russia’s Kursk region that is now under the control of the Ukrainian military. The gas transits through Ukraine to Slovakia. There the pipeline divides into branches that carry materials to the Czech Republic and Austria.
The transit agreement brought money to Russia and Ukraine.
Ukrainian media quoted Serhii Makohon, former head of Ukrainian operator GTS, as saying that Russia had made far more money from the transit deal than Ukraine.
Makohon estimates that Russia earns $5 billion a year, a figure also reported by the Reuters news agency. For its part, Ukraine used to get $800 million a year “but the maximum of that cash is spent on transit itself. “The treasury [of Ukraine] gets between $100 million and $200 million in taxes and dividends,” Makohon said in Ukrainska Pravda.
Bloomberg estimated that Russia’s revenue from the deal would be even higher, at $6. 5 billion a year.
Austria, Slovakia and Moldova were relying on the transit route for their power supply.
Austria got most of its fuel from Russia and Ukraine, while Slovakia received about 3 billion cubic meters a year, about two-thirds of its demand.
Austria’s electricity regulator, E-Control, said it was ready for an upgrade at the source and did not expect to suffer any disruptions.
Slovak Prime Minister Robert Fico said on Wednesday that the halt in supply will cost the Eastern European nation hundreds of millions of dollars in transit revenue and a higher fee for the import of other gas.
Fico asserted that this would result in the rise of gas prices across Europe. The Slovak economy ministry said that the country will have to bear the cost worth 177 million euros ($184m) for receiving gas through alternative routes.
Moldova is perhaps the most vulnerable country. Russia has shipped about 2 billion cubic meters of fuel through Ukraine to Transnistria, the pro-Russian breakaway region of Moldova, every year since 2022. Transnistria, which borders Ukraine, would then sell electricity, produced from Russian fuel, to government-controlled portions. from Moldova.
Moldova has already declared a state of emergency due to the impending fuel shortage. Moldovan President Maia Sandu criticized Gazprom for not going in an elected direction and said this winter in Moldova would be “tough” without Russian fuel.
However, Moldovan Prime Minister Dorin Recean said Moldova has diversified its fuel sources.
On Wednesday, Transnistria, home to 450,000 people, cut off heating and domestic hot water to homes.
Ukraine itself uses Russian transit gas, according to the European Commission, which added that the bloc was prepared for the disruption.
The pipeline through Ukraine is one of the last operating routes used to export Russian fuel. Other pipelines have been closed as a result of the 2022 Ukraine war, adding the Yamal-Europe pipeline through Belarus and the Nord Stream pipeline under the Baltic Sea that carried fuel to Germany.
Russia still uses the TurkStream pipeline at the back of the Black Sea to export gas. The pipeline has two pipelines, one supplying Turkey’s domestic market and the other to material consumers in Central Europe, as well as Hungary and Serbia.
However, TurkStream has an annual capacity of 31. 5 billion cubic meters for the two lines combined.
Europe has tried to reduce its dependence on Russian fuel, buying liquefied natural gas (LNG) from Qatar and the United States, as well as gas pipelines from Norway.
“Europe’s fuel infrastructure is flexible enough to supply fuel of non-Russian origin to select routes in Central and Eastern Europe. It has been strengthened through significant new LNG import capacity from 2022,” said Anna- Kaisa Itkonen, spokesperson for the European Commission.
SPP, a major energy supplier in Slovakia, said in a statement on Wednesday that it was in a position to make the transition and would supply its consumers through select routes, mainly from Germany and also Hungary. However, he added that he would face higher prices when it comes to transit fares.
According to Austrian electricity regulator E-Control, Slovakia could only get fuel from Hungary, about a third from Austria and the rest from the Czech Republic and Poland. The Czech Republic also said it could supply Slovakia with fuel transit and storage capacity.
Moldovan energy company Energocom issued a statement on Tuesday stating that Moldova could meet only 38 percent of its energy needs through domestic production, adding 10 percent from renewable energy. Energocom added that Transnistria would import the remaining 62% from neighbouring Romania.