Russian energy company Gazprom has begun to reduce the flow of gas that continues to come to Europe through gas pipelines passing through Ukraine: in fact, the agreement that has kept the flow of gas active despite almost three years of war expires today. Unless a last-minute deal is struck, the five-year transit agreement between Russia and Ukraine will not be renewed as of January 1, marking a complete break in Moscow’s dominance of the European gas market.
Kiev refused to renew the contract due to the ongoing war, thus giving up $800 million in annual royalties. Gazprom, on the other hand, will lose almost 5 billion dollars from gas sales to Europe.
The remaining buyers of Russian gas, such as Slovakia and Austria, have arranged alternative supplies, and analysts expect the disruption of Russian gas flows to have minimal impact on the market. However, contracts expiring in February 2025 are trading up 3% today at 49.3 euros per megawatt hour on the reference market Amsterdam TTF.
Hungary will be the last country to continue receiving Russian gas through the TurkStream pipeline passing under the Black Sea.
Gas used as a weapon by Russia
Stopping the flow of gas has a very important geopolitical significance: the invasion of Ukraine in 2022 pushed the EU to reduce its dependence on Russian gas, and Moscow gradually lost its dominant share of gas supplies to European Union countries in favor of its rivals. Like the United States, Qatar and Norway.
The last operational gas pipeline through Ukraine carries gas from Siberia through the town of Sudzha in Russia’s Kursk region, which is currently under the control of Ukrainian soldiers. It then flows to Slovakia via Ukraine. In Slovakia, the pipeline branches off to the Czech Republic and Austria. These are relatively small volumes (about 15 billion cubic meters in 2023), or only 8% of the peak flows of Russian gas to Europe through various routes in 2018-2019.
It took half a century for Russia, and before that the Soviet Union, to gain a large share of the European gas market, 35% at its peak, but the war in Ukraine nearly destroyed that business for Gazprom. State-controlled Gazprom, once the world’s largest gas exporter, reported losses of $7 billion in 2023 alone; this was its first annual loss since 1999.
Most of Russia’s gas routes to Europe are now closed, including Yamal-Europe via Belarus and the Nord Stream under the Baltic Sea, which explodes in 2022. Loss of gas supplies for Europe Cheap Russian gas contributed to a sharp economic slowdown, a sudden increase. Inflation and a worsening cost of living crisis. The loss of global competitiveness weighs heavily and is particularly explosive for Germany’s industrial future.
Moldova case
Cutting off supplies through Ukraine will be a serious blow to Moldova. Starting tomorrow, Chisinau will also no longer be able to receive Russian gas, which is routed to Transnistria and converted there into low-cost electricity. The official reason for this decision is the unpaid debts of the Moldovan side.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
