Russian Gas Exports to Europe Halted as Transit Deal Expires

In the early hours of New Year’s Day, Russian natural gas exports via Soviet-era pipelines running through Ukraine to Europe were halted, marking the end of a decade-long energy transit relationship. The expiration of the transit agreement and the ongoing conflict between Russia and Ukraine left the two nations unable to reach a new accord to continue the gas flows.

Ukraine’s Energy Minister, German Galushchenko, described the cessation of gas transit as a historic event, stating, “Russia is losing its markets, it will suffer financial losses. Europe has already made the decision to abandon Russian gas.” This move culminates years of strained relations following Russia’s annexation of Crimea in 2014, with Ukraine ceasing to buy Russian gas the following year.

A Shift in Energy Markets Amid Conflict

The shutdown of one of Russia’s oldest gas routes to Europe had been anticipated given the ongoing war, which began in February 2022. Ukraine had made it clear that it would not extend the transit agreement in the face of the military conflict. According to an industry source, Gazprom had already accounted for the loss of gas transit via Ukraine, which once comprised around half of Russia’s total pipeline gas exports to Europe.

However, Russia continues to export gas via the TurkStream pipeline, which runs across the Black Sea, supplying both Turkey and central European nations such as Hungary and Serbia. Despite this, the European Union has intensified efforts to reduce its reliance on Russian energy, particularly after the war escalated in 2022. Countries such as Slovakia and Austria, who were still receiving Russian gas via Ukraine, have already secured alternative supply routes.

Moldova Faces Significant Impact

Among the countries most affected by the cessation of gas flow is Moldova, a former Soviet republic, which now faces the challenge of reducing its gas consumption by a third. While the immediate impact on Europe’s response remained unclear early Wednesday, the shutdown represents a significant reshaping of European energy markets.

The five-year gas transit agreement between Russia and Ukraine expired on January 1, 2025. Gazprom confirmed that due to Ukraine’s refusal to renew the agreement, it no longer had the legal or technical ability to transport gas through Ukrainian territory, effective from 08:00 Moscow time (05:00 GMT). Ukraine, in turn, stated that the halt in gas transportation was in the interest of national security.

Financial Losses for Both Sides

Ukraine now stands to lose approximately $800 million annually in transit fees, while Gazprom faces a significant blow, with losses expected to total nearly $5 billion in gas sales.

The interruption of these key transit routes represents a broader shift in European energy dependencies. For decades, Russia and its former Soviet partners dominated European gas markets, at one point supplying around 35% of Europe’s gas demand. However, the war has severely eroded Gazprom’s presence, with the Yamal-Europe pipeline via Belarus also now closed and the Nord Stream pipeline destroyed in 2022.

In 2018, Russian pipelines delivered a record 201 billion cubic meters (bcm) of gas to Europe, but this volume has sharply declined. In 2023, only about 15 bcm of gas passed through Ukraine, down from 65 bcm in 2020. The future of Russia’s gas exports to Europe remains uncertain as alternative routes and energy sources continue to reshape the continent’s energy landscape.