The flow of Russian gas to several European countries was cut off on New Year’s Day after Ukraine refused to renegotiate a war-torn transit deal with Moscow.
Ukraine’s unwillingness to renew the five-year transit deal aims to rob Russia of revenue that Moscow can use to fund its war, but the move is likely to create an energy crisis in Eastern Europe, with Transnistria – a Moldovan separatist region – reducing heat and hot water supply for households.
“It ends what was once Russia’s dominance of the EU energy market,” said Al Jazeera’s Jonah Hull, reporting from the Ukrainian capital, Kiev. Before the invasion of Ukraine in 2022, Russia supplied about 35 percent of the European pipeline’s natural gas exports.
With the closure of Russia’s oldest gas route to Europe, operational for more than 40 years, Russia’s share has shrunk to less than 10 percent. Another gas pipeline that runs through Turkey still supplies gas to countries like Hungary.
So how will turning off the taps during the peak of the winter season affect countries, especially in Eastern Europe, and what might happen next?
Why was the flow of Russian gas to Europe through Ukraine cut off?
Russian energy giant Gazprom said on Wednesday that gas supplies to Europe had been cut at 8 a.m. local time (0500 GMT) after Ukraine’s state oil and gas company Naftogaz refused to renew its latest five-year supply agreement. transit.
On Wednesday, Ukraine’s Energy Minister German Galushchenko said in a statement: “We stopped the transit of Russian gas. This is a historic event. Russia is losing its markets, it will suffer financial losses. Europe has already made the decision to abandon Russian gas”.
The last contract was first signed in 2020 under which Ukraine was paid shipping fees. But Ukrainian President Volodymyr Zelenskyy had warned that Kiev would not renew the transit agreement amid the ongoing war.
How much gas did Russia export to Europe?
Many European countries began to reduce their dependence on Russian gas after Moscow’s invasion of Ukraine in February 2022.
At its peak, Moscow’s share of European gas imports was 35 percent, but has fallen to about 8 percent.
The European Union received less than 14 billion cubic meters (bcm) of gas from Russia through Ukraine since December 1, down from 65 billion cubic meters a year when the contract began in 2020.
The gas is shipped via the Soviet-era Urengoy-Pomary-Uzhgorod pipeline from Siberia through Sudzha, a town in Russia’s Kursk region that is now under the control of the Ukrainian military. The gas passes through Ukraine to Slovakia. There, the pipeline splits into branches that take the supply to the Czech Republic and Austria.
The transit agreement was bringing financial returns for Russia and Ukraine.
Ukrainian media quoted Serhii Makoho, the former head of Ukraine’s GTS Operator, as estimating that Russia earned a larger amount of money from the transit deal than Ukraine.
Makohon estimated that Russia earned $5 billion a year, a number also reported by the Reuters news agency. On the other hand, Ukraine received 800 million dollars annually, but most of this money is spent on transit itself. The (Ukrainian) treasury receives $100-200 million in taxes and dividends,” Makohon was quoted as saying by Ukrainska Pravda.
Bloomberg estimated that Russia’s profits from the deal were even higher, at $6.5 billion a year.
Will there be a power outage? Who will be affected by this?
Austria, Slovakia and Moldova were relying on the transit route for their electricity supply.
Austria was getting most of its gas from Russia via Ukraine, while Slovakia received about 3 billion cm per year via the route, which amounted to roughly two-thirds of its demand.
Austrian energy regulator E-Control has said it is prepared for supply disruptions and should not face disruptions.
Slovak Prime Minister Robert Fico said on Wednesday that the supply cut will cost the eastern European nation hundreds of millions of dollars in transit revenue and a higher tariff on importing other gas.
Fico claimed that this would result in higher gas prices across Europe. Slovakia’s economy ministry said the country would have to bear the 177 million euro ($184 million) cost of getting gas through alternative routes.
Perhaps the most endangered is Moldova. Russia has sent about 2 bcm of gas through Ukraine to Moldova’s pro-Russian separatist region of Transnistria every year since 2022. Transnistria, which borders Ukraine, will then sell electricity, produced from Russian gas, to parts of Moldova controlled by the government.
Moldova has already declared a state of emergency due to the impending gas shortage. Moldovan President Maia Sandu has blamed Gazprom for not considering an alternative route and said this winter in Moldova would be “severe” without Russian gas.
However, Moldovan Prime Minister Dorin Recean has said that Moldova has diversified sources of gas supply.
On Wednesday, Transnistria, home to 450,000 people, cut off heating and hot water supplies to households.
Ukraine itself does not use Russian transit gas, according to the European Commission, which added that the bloc had prepared for the cut.
Has the flow of Russian gas to Europe completely stopped?
The pipeline passing through Ukraine was one of the last functioning routes used to export Russian gas. Other pipelines were shut down in the wake of the 2022 war in Ukraine, including the Yamal-Europe pipeline through Belarus and the Nord Stream pipeline under the Baltic Sea, which delivered gas to Germany.
Russia still uses the TurkStream pipeline in the Black Sea to export gas. The pipeline has two lines, one feeding the domestic market in Turkey, while the other supplies Central European customers including Hungary and Serbia.
However, TurkStream has limited annual capacity, amounting to 31.5bcm for both lines combined.
What are the alternative options for Europe?
Europe has been trying to reduce its dependence on Russian gas, after buying liquefied natural gas (LNG) from Qatar and the US, along with gas supplies from Norway.
“The European gas infrastructure is flexible enough to deliver gas of non-Russian origin to Central and Eastern Europe via alternative routes. It has been reinforced with significant new LNG import capacity from 2022,” said Anna-Kaisa Itkonen, a spokeswoman from the European Commission.
A major energy supplier in Slovakia, SPP said in a statement on Wednesday that it was prepared for the transition and would supply its customers via alternative routes, mainly from Germany and also Hungary. However, he added that he would face additional costs in transit fees.
According to Austrian energy regulator E-Control, Slovakia can get gas from Hungary, roughly a third from Austria and the remaining supply from the Czech Republic and Poland. The Czech Republic has also said it could provide Slovakia with gas transit and storage capacity.
Energy firm Transnistria Energocom issued a statement on Tuesday saying Moldova could meet 38 percent of its energy needs from domestic production, including 10 percent from renewable energy. Energocom added that Transnistria would import the remaining 62 percent from neighboring Romania.
