A New Era in European Energy Markets
The flow of Russian gas to several European countries came to a halt on New Year’s Day, marking the end of Moscow’s decades-long dominance over Europe’s energy markets. This move was widely expected, as neither Russia nor Ukraine was willing to strike a new deal amid the ongoing war.
Ukraine Takes a Stand
Ukrainian President Volodymyr Zelenskyy had made it clear that Kyiv was not prepared to prolong the transit of Russian gas, stating that they would not give Moscow the opportunity to earn additional billions “on our blood.” This decision is expected to cost Ukraine up to $1 billion a year in transit fees, while Gazprom stands to lose around $5 billion in gas sales.
Impact on European Countries
The European Commission has been working with EU member states most impacted by the end of the gas transit agreement to ensure the entire 27-nation bloc is prepared for this scenario. Slovakia, Austria, and Moldova are among the countries most at risk from the stoppage, having been heavily dependent on transit volumes of Russian gas in 2023.
Austria and Slovakia React
Austria has insisted it is well prepared for the stoppage, but Slovakia’s Prime Minister Robert Fico warned that Ukraine’s termination of the gas transit agreement would have a “drastic” impact on the EU, without harming Russia. Fico also threatened to cut electricity supplies to neighboring Ukraine.
Moldova Declares State of Emergency
Moldova, which is not a member of the EU, declared a 60-day state of emergency last month over energy security fears. The government said this would allow the country to apply a series of measures to prevent and mitigate the threat of insufficient energy resources.
A Historic Event
Ukrainian Energy Minister Herman Galushchenko described the cessation of Russian gas flows via Ukraine as a “historic event.” He stated that Russia is losing markets and will suffer financial losses, while Europe has already decided to abandon Russian gas.
Polish Foreign Minister Hails Victory
Polish Foreign Minister Radek Sikorski hailed the development as a political victory, accusing Russia’s Putin of having tried to “blackmail Eastern Europe with the threat of cutting off gas supplies.”
EU Gas Storage Facilities
The latest data shows that the EU’s gas storage facilities are around 73% full, with Germany’s inventories currently at nearly 80%. This should help mitigate the impact of the stoppage.
Expert Analysis
Christoph Halser, gas and LNG analyst at Rystad Energy, said that without Azerbaijan or another third party transiting the gas following a swap deal with Russia, the EU will require about 7.2 billion cubic meters of gas to be sourced from the LNG market. Henning Gloystein, practice head of energy, climate and resources team at Eurasia Group, said the expiry of the deal does not threaten EU winter energy security, citing steps taken by EU importers to prepare for the cut in supply and the mild winter weather seen across most of Europe.
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