Russian gas shipments via Ukraine were stopped in Italy at 6 am. In the statement made by the Russian state company, it is stated that “Gazprom has lost its technical and legal capacity to transport gas today.” The European Commission guarantees that “the impact on supply will be limited” in Europe thanks to “alternative routes”. But natural gas prices reached 50 euros per megawatt hour for the first time since October 2023, and analysts expect a 30% increase in energy bills in 2025.
The closure of Russia’s oldest gas route to Europe marks the end of an era. Following the start of the conflict triggered by Russia’s capture of Crimea in 2014, the distance between Moscow and Kiev has further increased. The following year, Ukraine stopped buying Russian gas.
In 2018, at the peak of energy exchange between Russia and Europe, 201 billion cubic meters of gas passed through the Ukrainian gas pipelines, which are closed today, and also through the Yamal-Europe gas pipeline passing through Belarus. It was blown up in the war – and the Nord Stream route across the Baltic Sea to Germany – in 2022.
Gas flows were expected to be cut off, and the war that started with a large-scale invasion in February 2022 did not allow a new transit agreement to be found: Ukraine was determined “in the name of national security”, even though it faced the loss of gas. Approximately 800 million dollars of transit fees come from Russia annually. Gazprom, on the other hand, will lose almost 5 billion dollars due to the lack of gas sales.
So what consequences will this stop have for Europe? From 2022, most European countries rely only minimally on gas from Russia, looking for alternative sources of supply and entering into contracts with other countries such as Qatar and the United States, which are helping the old continent contain energy price growth.
- The current largest customers, Slovakia and Austria, have already organized alternative supply.
- Now gas exports still reach Hungary and Serbia via the TurkStream pipeline in the Black Sea.
- However, Moldova will be among the countries most affected by the situation and will have to take measures to reduce gas consumption by a third.
Consequences for Russia
If Europe has to face the consequences of more burdensome energy contracts along with reduced industrial competitiveness, Russia will also suffer from the cut in gas purchases of European countries. Last year, Russian state company Gazprom recorded losses of more than $7 billion, despite the Russian giant’s efforts to offset this decline in exports to the West with China.
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.
