The Stranglehold

Ukraine halted the flow of Russian natural gas to Europe at the start of the new year, bringing an end to decades of energy transit via Soviet-era pipelines and raising fresh concerns about energy security across the European Union, CNBC reported.

The move followed Kyiv’s refusal to renew a five-year gas transit deal with Moscow amid the ongoing war, cutting off one of the last remaining links between Europe and Russia’s once-dominant energy network.

The deal, brokered by the EU in 2019, allowed Moscow to transport natural gas through Ukraine to European markets.

Under the agreement, Ukraine received transit fees of up to $1 billion annually, while Russia’s Gazprom maintained access to its European customers.

Ukrainian Energy Minister Herman Galushchenko described the decision as a “historic event,” signaling a blow to Russia’s revenue stream.

Moscow is expected to lose up to $6.5 billion annually in gas revenues, while Ukraine will be deprived of $1 billion a year in transit fees, according to the Wall Street Journal.

Observers noted that the gas transit cut-off marks a significant shift in Europe’s energy landscape, with Russia’s dominance over European energy markets further eroded.

Some analysts said that the impact on Europe’s energy security is limited due to extensive preparation, including diversified suppliers and reduced gas demand.

EU officials have insisted that the bloc was prepared for the stoppage, citing high gas storage levels – being 73 percent full across the EU, and at nearly 80 percent in Germany – and extensive efforts to diversify supply.

Since 2022, when Russia invaded Ukraine, Europe has drastically reduced its reliance on Russian gas, which accounted for 45 percent of imports before the war – but by 2023, only 10 months after Russia’s invasion, dropped to 15 percent. European countries have increased imports of liquified natural gas (LNG) from the United States and Qatar, as well as pipeline gas from Norway, Azerbaijan, and Algeria.

Still, some analysts warned that the cutoff will affect a number of European countries that are heavily reliant on Russian gas.

While Austria has emphasized its readiness for the stoppage, other EU countries, such as Slovakia and Hungary, have expressed frustration over the halt.

Slovakia, which imported approximately 3.2 billion cubic meters of gas in 2023, described the impact as “drastic,” with Prime Minister Robert Fico warning it could destabilize the EU while leaving Russia relatively unscathed, Euronews added.

Fico – who visited his ally, Russian President Vladimir Putin, last month – has also accused Ukraine of exacerbating the EU’s energy challenges and suggested Slovakia might reconsider its emergency electricity exports to Kyiv.

Meanwhile, Moldova is also facing a heightened risk of shortages as the country declared a 60-day state of emergency over energy security in December.

Energy analysts cautioned the halt will further strain European energy markets, particularly if demand spikes due to cold weather or unforeseen supply disruptions.