Russian gas shipments to Europe through Ukraine are set to cease on New Year’s Day, marking the end of a pipeline route that symbolized Moscow’s long-held dominance in the European gas market. This development comes as a five-year transit agreement between Russia and Ukraine expires, and Ukraine’s gas transit operator confirmed on Tuesday that no requests for Jan. 1 deliveries had been made by Russia.
The European Union (EU) has significantly reduced its reliance on Russian gas since the outbreak of the Ukraine war in February 2022, turning to alternative suppliers like the United States, Qatar, and Norway. Remaining buyers of Russian gas, including Slovakia and Austria, have secured alternative sources, with analysts predicting minimal market disruption. On Tuesday, European benchmark gas prices remained stable, closing at €48.50 per megawatt-hour, showing only a slight increase.
The cessation of Russian gas via Ukraine holds greater geopolitical implications than economic ones. Moscow, once the dominant supplier to the EU, has seen its share of the market decline sharply. State-controlled Gazprom, which once positioned Russia as the world’s leading gas exporter, reported a $7 billion loss in 2023, its first annual deficit in over two decades.
The war in Ukraine, along with the EU's pivot to alternative energy sources, has effectively dismantled Gazprom's grip on the European market, which once accounted for around 35% of Europe’s gas supply. Key pipelines like Yamal-Europe via Belarus and Nord Stream under the Baltic Sea—damaged in 2022—are no longer operational.
The Soviet-era pipeline via Ukraine, which transported gas from Siberia through Sudzha in Russia’s Kursk region and into Europe via Slovakia, is now also being decommissioned. Ukraine has declined to negotiate a renewal of the transit agreement, forfeiting approximately $800 million annually in transit fees. For Gazprom, this means losing close to $5 billion in European sales.
While the halted pipeline impacts Moldova and potentially Hungary, which relies on TurkStream for Russian gas, the effect on Europe’s broader energy market is expected to be limited. Russian shipments through Ukraine in 2023 amounted to only 15 billion cubic meters—8% of peak flows recorded in 2018-2019.
This shift underscores Europe’s rapid adaptation to energy challenges but also exacerbates concerns over long-term industrial competitiveness and energy security, particularly in Germany. Meanwhile, Russia’s position in the global gas market continues to weaken, capping off a half-century legacy of energy dominance in Europe.