For all parties involved, the cessation of transit has long been expected and for none of them this event is no longer critical. Europe is losing the opportunity to receive about 15 billion cubic meters of gas per year. First of all, Slovakia, Austria, Hungary and Moldova depended on this route. None of them will be left without gas; Hungary has completely agreed to continue supplies of Russian gas, only through the Turkish Stream. The rest will buy gas from neighboring countries that have access to the sea and terminals for receiving liquefied natural gas (LNG). This gas will be much more expensive than Russian gas, but this is no longer our problem.
Photo: IMAGO/Jens Koehler via Reuters Connect
Russia is losing the sales market for the same 15 billion cubic meters of gas. Gazprom has just begun to increase gas production after the failure of 2023. Since 2021, Russian gas exports to the EU have decreased from 150 to 30 billion cubic meters in 2023. Gas production fell accordingly. In 2024, due to an increase in supplies to China, a slight recovery in exports to Europe, as well as an increase in domestic consumption, production began to grow again. Now we can expect another decline. Moreover, without the ability to significantly compensate for losses at the expense of China (the Power of Siberia gas pipeline reached its maximum capacity in 2024). Another gas pipeline to China, the Far Eastern Route, will start operating only in 2027. It will probably be possible to slightly compensate for the losses through supplies to Central Asia, but even in the most optimistic scenario we are talking about 1-2 billion cubic meters per year out of 15 billion cubic meters lost.
In September 2014, the first link of the Power of Siberia gas pipeline was connected in the area of the village of Us Khatyn. Photo: Valery Sharifulin/ TASS
As noted by the head of the National Energy Security Fund (NEF), Konstantin Simonov, another part of the volumes can be tried to be redirected to Europe through Turkey, but the volumes there are limited by the capabilities of the infrastructure. The struggle for the European gas market is not over, but Gazprom should not count on it, the expert believes. Moreover, with the return to the post of US President Donald Trump, who is actively promoting American LNG, the struggle for the European market will reach a new level. At the same time, Simonov is confident that Gazprom’s priority in the current situation should be supplies to the domestic market.
With Trump returning to the White House, the US promotion of its own LNG to Europe is likely to intensify. Photo: REUTERS/Leah Millis
As for Ukraine, the transit stop deprives it of approximately $800 million a year. On the other hand, Kyiv is promoting the idea of creating a gas hub together with Poland. Poland will become the importer of raw materials, and Ukraine will accumulate and send it to buyers, using the capacity of its underground gas storage facilities (UGS). Naturally, such supplies will be more expensive for Europe than our gas: first, LNG production, sea delivery to Poland, regasification, pumping to Ukrainian underground gas storage facilities, storage there and again pumping to the final buyer.
According to Valery Andrianov, associate professor at the Financial University under the Government of the Russian Federation, we are talking about Poland’s long-standing plan to create an LNG storage and distribution facility in Eastern Europe. First of all, American. Since 2015, an LNG terminal with a capacity of 5 billion cubic meters per year has been operating on the Baltic coast of Poland, in Swinoujscie. There are plans to expand it to 7.5 billion cubic meters. There is a technical possibility of supplying up to 2 billion cubic meters of gas per year from there through Poland to Ukraine, but through the expansion of the Polish gas transportation system (GTS) it is planned to increase this figure to 6.6 billion cubic meters per year. In addition, plans are being hatched to organize gas supplies to Ukraine from the LNG terminal in Lithuanian Klaipeda, again in transit through Poland. The capacity of this terminal is 3.75 billion cubic meters per year, and there are prospects for expansion to at least 5 billion cubic meters.
Swinoujscie LNG terminal. Photo: Radosław Drożdżewski/ wikipedia.org
The hub project assumes that regasified LNG will be pumped through pipes to underground gas storage facilities in Ukraine. And from there, gas can flow through the infrastructure used today to pump Russian gas to the Austrian Baumgarten. These storage facilities could be used as reserve storage facilities and gas could be taken from them in the event of an increase in prices for “blue fuel” in Europe, that is, under the most favorable price conditions, the expert clarifies.
Europe will be forced to pay significantly more for gas from other countries than for Russian gas. Moreover, volatility in the European gas market will increase significantly.
That is, the cessation of Ukrainian transit turns out to be the most painful for European countries. For us, this is a loss of part of the budget’s oil and gas revenues (small) and, what is most unpleasant, another decrease in gas production, which, however, will be gradually compensated by new export routes and an increase in domestic consumption. Europe will be forced to pay significantly more for gas from other countries than for Russian gas. Moreover, volatility in the European gas market will increase significantly. However, EU countries can initiate negotiations on the resumption of transit. But this is unlikely to be done now, when European underground gas storage facilities are 73% full, and two months of the heating season are already behind us. But at the end of spring or summer, European companies may raise the topic of resuming purchases of Russian gas through Ukraine.
Sudzha gas distribution pumping station. Photo: REUTERS/Denis Sinyakov
The EC announced the EU’s readiness to stop gas transit through Ukraine
Anna-Kaisa Itkonen, an official representative of the European Commission, said that EU countries are ready to stop Russian gas supplies through Ukraine. “The cessation of supplies from January 1 was an expected situation, the European Union was prepared for it,” Itkonen reports the words RIA Novosti.
She added that the European Union had been working for more than a year to prepare for such a scenario – preparing alternative supply routes for interested countries. According to her, the European gas infrastructure is quite flexible for delivering gas from outside Russia to Eastern and Central Europe. Itkonen noted that two years ago this infrastructure was strengthened with new capacity for importing liquefied natural gas. The representative of the European Commission is confident that this should improve the security of energy supplies.
If supplies do stop, the only source of Russian pipeline gas for Europe will be Balkan Stream.
It receives fuel from the Turkish Stream and annually supplies about 14-15 billion cubic meters of gas to Hungary, Greece, Romania, Serbia, Bosnia and Herzegovina and North Macedonia.
Where it all began
The Uzhgorodskaya gas compressor station operates in the Bratstvo and Soyuz gas pipeline system and is connected to the Urengoy-Uzhgorod gas pipeline. Photo: B. Klichenko/RIA Novosti
The history of gas transit from Russia to Europe via Ukraine, which began during the era of the Soviet Union, is closely connected with the development of energy infrastructure in the eastern part of Europe. This gas pipeline, on the one hand, is an important element of the energy security of the European Union, and on the other, a source of political and economic disputes between Russia, Ukraine and European countries.
Back in the 1960s, the USSR began to actively develop large natural gas fields in Western Siberia. Then a large-scale gas transportation system was created to export gas to Europe. The first gas pipelines were laid through the territory of Ukraine to the countries of Eastern Europe, including Austria, Hungary and Czechoslovakia. One of them is the Brotherhood, which was put into operation in 1967 and became the first large gas pipeline to connect the USSR and Europe.
Ukrainian SSR. The second stage of the “Brotherhood” gas pipeline – the main gas pipeline “Dolina – Uzhgorod – Western Border” – is being laid. Photo: Boris Kristul/ RIA Novosti
In the 1970-1980s, the USSR continued to expand its gas transportation network. In particular, ba new gas pipeline “Soyuz” was built (it was also called “Orenburg – Western Border of the USSR”), delivering gas to Western Europe. It passed through the territory of Russia, Kazakhstan and Ukraine along the following route: Orenburg – Uralsk – Aleksandrov Gai – GIS “Sokhranovka” – Kremenchug – Dolina – Uzhgorod. Its total length is 2,750 km. The USSR also signed a contract with the Federal Republic of Germany for gas supplies. These and other projects became part of the USSR’s strategy to strengthen economic ties with Europe and ensure stable exports of energy resources.
Welding the “Red Joint” of a gas pipeline on the Soviet-Czechoslovak border. Photo: Vladimir Migovich/TASS Photo Chronicle
Around the same time, the construction of a gas pipeline from Urengoy to Uzhgorod with a length of 4,451 km was completed. The pipeline was supposed to carry 28 billion cubic meters of gas per year through 1420 mm pipes – at that time this was beyond the capabilities of Soviet engineers, which the United States took advantage of by actively prohibiting the transfer of pipes and technologies here. However, this only fueled the excitement of the builders, and the gas pipeline was put into operation ahead of schedule. By 1985, the USSR surpassed the United States in natural gas production by one and a half times, and thanks to innovations it was possible to save 5 billion rubles.
Poltava region. Kremenchug. November 14, 1977 Participants in the welding of the last seam of the Druzhba gas pipeline. Photo: Igor Volchkov/ TASS
In 1991, when the Soviet Union collapsed, gas pipelines that passed through Ukraine remained a key route for Russian gas supplies to Europe. However, relations between the two countries have become more complicated. In 1992, Ukraine received the main gas pipelines through which Russia supplied gas to Europeans. For several years, the contract was renewed on an annual basis, but in 2009 it was decided to conclude the deal for 10 years at once, that is, until the end of 2019.
This period was also distinguished by the so-called “gas” crises. The most serious ones occurred in 2006 and 2009: first, Russia, amid disputes over prices and transit payments, temporarily stopped gas supplies to Ukraine, which caused a reduction in the flow to Europe, then the supply was completely stopped for two weeks.
Then Russia decided to develop alternative routes that would bypass Ukraine: in 2011, the Nord Stream began operation, which runs along the bottom of the Baltic Sea and directly connects Russia with Germany, and in 2020, the Turkish Stream.
On the night of December 31, 2019, one day before the expiration of the contract, the parties were able to agree on a new contract – for the period 2020-2024. The agreement also included the possibility of extension for another 10 years. A year later, transit through Ukraine was expected to amount to 65 billion cubic meters and 40 billion cubic meters annually from 2021 to 2024. The document also provided for the withdrawal of all mutual judicial and arbitration claims of Gazprom and Naftogaz, on which no final decisions had been made. At the same time, the Ukrainian authorities expected to receive more than $7 billion from Moscow for transit.
In May 2022, when Ukraine decided to stop transit to Europe through the Sokhranovka station, gas supplies began to be reduced. At the same time, Europe declared a refusal to supply fuel from Russia and imposed sanctions, as a result of which it was necessary to transfer payments for gas for unfriendly countries into rubles. As a result, a number of European companies refused to comply with these requirements, after which they were cut off from supplies from Russia. Europe violated its contractual obligations regarding the maintenance of turbines for Nord Stream, which is why pumping through the gas pipeline fell. Also, a terrorist attack soon occurred – only one line of Nord Stream 2 survived, which led to a sharp jump in gas prices in Europe, the closure of enterprises in energy-intensive industries and the transfer of production facilities to neighboring regions.
Source: rg.ru
