As of January 1, 2025, Russia has officially stopped supplying gas to the European Union through Ukraine.
The five-year transit deal between Russian energy giant Gazprom and Ukraine’s state energy company, Naftogaz, expired on December 31, 2024, with no extension agreed upon.
The cessation has significant consequences for European energy security and market stability.
Background: The Transit Deal
Under the 2019 agreement, Gazprom transported Russian gas via Ukraine’s extensive pipeline network to several EU states.
The contract initially facilitated the transit of 65 billion cubic meters (bcm) of gas in 2020, reducing to 40 bcm annually from 2021 to 2024.
The deal connected Russian gas to Moldova, Romania, Poland, Hungary, Slovakia, and further into Austria and Italy.
Why Was the Deal Terminated?
Ukraine repeatedly announced its refusal to extend the transit agreement, citing national security concerns amid its ongoing conflict with Russia.
Ukrainian Prime Minister Denis Shmigal declared that as of 2025, Ukraine would only use its pipeline infrastructure for transporting gas from alternative suppliers.
The Ukrainian Energy Ministry confirmed the move, explaining that the halt was made “in the interests of national security.”
Russia’s Position
In response, Gazprom halted supplies through Ukraine, stating that it was “deprived of the technical and legal opportunity” to continue.
Russian President Vladimir Putin criticized Kyiv’s decision, accusing it of punishing the EU.
He predicted the move would drive up energy prices for European consumers but emphasized that Russia and Gazprom would not be significantly affected.
Who Will Be Most Affected?
The end of the transit agreement has major implications for EU countries that rely heavily on Russian gas.
Slovakia: With Russian supplies via Ukraine accounting for 60% of its gas demand, Slovakia is expected to be hit the hardest.
Moldova: The country, which relies on Russian gas to fuel its primary power station, faces potential electricity shortages.
Other EU States: Although gas transported through Ukraine constitutes only 3.5% of the EU’s total consumption, the halt could disrupt the entire energy market.
Alternative Routes for Russian Gas
Not all Russian gas to Europe relied on Ukraine’s pipelines. Other supply routes include:
TurkStream Pipeline: Running under the Black Sea, this pipeline supplies Türkiye and several central European nations, including Hungary and Serbia.
LNG Exports: Russia also exports liquefied natural gas (LNG) to Europe, though LNG remains a more expensive option compared to pipeline gas.
EU’s Response and Alternative Supplies
Since 2022, the EU has prioritized reducing its dependence on Russian energy. Measures include:
Increased imports of pipeline gas from Norway.
Boosted LNG supplies from Qatar and the United States.
However, LNG imports are costlier than Russian pipeline gas, and potential regulatory disputes with Qatar and the U.S. could further strain supply chains.
Impact on EU Gas Prices
Experts warn that the cessation of gas transit through Ukraine could lead to a spike in energy prices.
Slovakia’s primary gas trader, SPP, estimates a potential 30% price increase across the EU.
This surge would translate into an additional annual cost of €40-50 billion for European households and businesses.
Can the Situation Be Resolved?
Russia has expressed its willingness to extend the transit deal, but Ukraine remains firm in its stance.
Reports suggest that the EU has explored alternative arrangements, such as signing contracts with Gazprom Export to bypass direct agreements between Moscow and Kyiv. However, no progress has been confirmed.
Outlook
The termination of the Russia-Ukraine gas transit deal underscores the growing fragility of Europe’s energy security.
With winter demand peaking, affected countries face immediate challenges in sourcing reliable and affordable energy.
The broader European gas market may experience increased volatility, highlighting the urgent need for diversified energy strategies and stronger intergovernmental cooperation.
