Russian gas flows to Europe through Ukraine halted after deal expires

Kyiv says it stopped the transit in the interests of national security

Pipelines at the Bilche-Volytsko-Uherske underground gas storage facility in the Lviv region of western Ukraine. AFP

Russian gas supplies to Europe through Ukraine stopped on New Year's Day as a transit deal with Kyiv lapsed, ending a supply that had continued even following Moscow’s invasion.

Russia's Gazprom said it was “deprived of the technical and legal opportunity to supply gas for transit through the territory of Ukraine from January 1, 2025”, due to “the repeated and explicit refusal of the Ukrainian side” to extend five-year agreements.

Ukraine said it made the decision in the interests of national security. “We have stopped the transit of Russian gas, this is a historical event,” the Ukrainian Energy Ministry said in a statement. “Russia is losing markets, and will begin to experience financial losses.”

Ukraine will lose up to $1 billion a year in transit fees from Russia, while Gazprom will lose close to $5 billion in gas sales. To help offset the financial impact of the transit fees loss, Ukraine will quadruple gas transmission tariffs for domestic consumers from Wednesday, which could cost the country's industry more than 1.6 billion hryvnias ($38.2 million) a year.

Ukraine's gas infrastructure has been prepared to work amid zero transit from Russia, and the country’s foreign partners have been warned, the statement said. Ukraine has secured guaranteed gas supplies enhanced by a southern route, as well as from Poland, the country’s Gas Transmission Operator said on its website.

For five decades Ukraine has been a key avenue for gas supplies into Europe. Russia still exports gas through the TurkStream pipeline on the bed of the Black Sea on two lines – one for the Turkish domestic market and the other supplying central European customers including Hungary and Serbia. But that link is not sufficient to fully compensate for the loss of the Ukraine route.

The breakaway pro-Russian Moldovan region of Transnistria was forced to cut heating and hot water supplies to households on Wednesday after Russia stopped its supply. “There is no heating or hot water,” an employee of local energy company Tirasteploenergo said. She said she did not know how long the situation would last.

A statement on the energy company's website said the heating cuts took effect at 7am local time on Wednesday, but some facilities such as hospitals were exempt. It urged residents to dress warmly, gather family members together in a single room, hang blankets or thick curtains over windows and balcony doors, and use electric heaters.

Transnistria split from the rest of Moldova after the Soviet Union collapsed in 1991 and has existed generally peacefully alongside it since a brief post-Soviet war in 1992. Some 1,500 Russian troops are stationed there.

The European Union redoubled its efforts to reduce its dependence on Russian energy after the outbreak of the war in Ukraine in 2022 by seeking alternative sources.

Russian gas accounted for less than 10 per cent of the European Union's gas imports in 2023 – down from more than 40 per cent before the war. But the halt comes as the region is depleting its winter storage at the fastest pace in years.

“The stop of flow via Ukraine on January 1 is the expected situation and the EU is prepared for it,” a European Commission spokeswoman said. The commission, the EU’s executive, has been working with member states for more than a year to prepare for such a scenario, she added.

Liquefied natural gas from Qatar and the United States has helped the EU find alternative supplies. Piped supply has come from Norway. But the halt in Russian gas transit through Ukraine will force some countries to dip deeper into their reserves and seek to import more liquefied natural gas.

European Commission President Ursula von der Leyen has set an objective of phasing out Russian fossil fuels by 2027 following the invasion of Ukraine, and has said the end of transit will have little impact on regional energy markets.

Disputes between Moscow and Kyiv have previously disrupted winter gas shipments to Europe.

In 2009, Russian gas flows through Ukraine to Europe stopped for almost two weeks, with more than 20 nations affected during freezing temperatures, until the two nations signed a gas deal ending their dispute. A shorter disruption occurred in 2006. The expiring agreement, set in 2019, was also a result of last-minute negotiations.

However, the war makes a quick resolution unlikely for now. Russian President Vladimir Putin said a lawsuit from Ukraine’s Naftogaz – alleging that Gazprom has not fully paid for transit services – is a barrier.