Ukraine will not extend its gas transit agreement with Russia after it expires after Dec. 31 2024, Ukrainian Prime Minister Denys Shmyhal told Slovak Prime Minister Robert Fico.
Here is what happens if gas is turned off and who will be affected most.
HOW BIG ARE THE VOLUMES?
Russian gas supplies to Europe via Ukraine are relatively small. Russia shipped about 15 billion cubic metres (bcm) of gas via Ukraine in 2023 – only 8% of peak Russian gas flows to Europe via various routes in 2018-2019.
Russia spent half a century building its European gas market share, which at its peak stood at 35%.
Moscow lost its share to rivals such as Norway, the United States and Qatar since the invasion of Ukraine in 2022, prompting the EU to cut its dependence on Russian gas.
EU gas prices rallied in 2022 to record highs after the loss of Russian supplies. The rally won’t be repeated given modest volumes and a small number of customers for the remaining volumes, according to EU officials and traders.
UKRAINIAN ROUTE
The Soviet-era Urengoy-Pomary-Uzhgorod pipeline brings gas from Siberia via the town of Sudzha – now under control of Ukrainian military forces – in Russia’s Kursk region. It then flows through Ukraine to Slovakia.
In Slovakia, the gas pipeline splits into branches going to the Czech Republic and Austria.
Austria still receives most of its gas via Ukraine, while Russia accounts for around two-thirds of Hungary’s gas imports.
Slovakia takes around 3 bcm from energy giant Gazprom per year, also about two-thirds of its needs.
Czech Republic almost completely cut gas imports from the east last year, but has started taking gas from Russia in 2024.
Most other Russian gas routes to Europe are shut including Yamal-Europe via Belarus and Nord Stream under the Baltic.
The only other operational Russian gas pipeline route to Europe is the Blue Stream and TurkStream to Turkey under the Black Sea. Turkey sends some Russian gas volumes onward to Europe including to Hungary.
WHY DOES THE UKRAINIAN ROUTE STILL WORK?
While remaining Russian gas transit volumes are small, the issue remains a dilemma for the EU. Many EU members such as France and Germany have said they would not buy Russian gas anymore but the stance of Slovakia, Hungary and Austria, which have closer ties to Moscow, challenges the EU common approach.
The countries, who still receive Russian gas, argue it is the most economic fuel and also blame neighbouring EU countries for imposing high transit fees for alternative supplies.
According to calculations, Ukraine still earns $0.8-$1 billion in transit fees from Russian gas transit. Russia earns over $3 billion on sales via Ukraine based on an average gas price of $200 per 1,000 cubic metres.
Russia’s gas pipeline export monopoly Gazprom plunged to a net loss of $7 billion in 2023, its first annual loss since 1999, because of the loss EU’s gas markets.
Russia has said it would be ready to extend the transit deal but Kyiv has repeatedly said it won’t do it.
Another option is for Gazprom to supply some of the gas via another route, for example via TurkStream, Bulgaria, Serbia or Hungary. However, capacity via these routes is limited.
The EU and Ukraine have also asked Azerbaijan to facilitate discussions with Russia regarding the gas transit deal, an Azeri presidential advisor told reporters, who declined to give further details.
(Reporting by Guy Faulconbridge and Vladimir Soldatkin)
