MOSCOW: Russia’s longstanding gas supply to Europe through Ukraine, a relationship that has lasted for decades, has come to a halt as the contract between the two nations collapses on New Year’s Day. This contract, which had long been a significant revenue stream for Moscow and Kyiv, marked the end of an era for European energy.
The shutdown of Russia’s oldest pipeline route to Europe ends a decade of strained relations following Russia’s 2014 annexation of Crimea. Since Russia’s invasion of Ukraine in 2022, the European Union has worked hard to reduce its reliance on Russian energy, seeking alternatives such as liquefied natural gas (LNG) from Qatar and the United States, along with pipeline supplies from Norway.
The shift became evident last year when Russian state-controlled gas company Gazprom reported a $7 billion loss—the first since 1999—despite efforts to ramp up exports to China. European nations that previously relied on Russian gas, such as Austria and Slovakia, have now secured alternative supplies, with Austria’s energy ministry reassuring that supplies for consumers are guaranteed through purchases from Italy and Germany. Slovakia, although facing extra costs for new supply routes, also ensured no shortage risks.
EU preparations for this shift included energy efficiency measures, renewable energy development, and expanding LNG infrastructure. As Anna-Kaisa Itkonen from the European Commission noted, the region’s gas network is flexible enough to accommodate non-Russian supplies to Central and Eastern Europe, reinforced by new LNG import capacities since 2022.
Market impact analysts predict little disruption from the pipeline shutdown, as the remaining gas volumes were small. European gas prices showed only a slight increase on the day of the announcement, reflecting minimal market reaction.
Despite the EU’s progress in diversifying its energy sources, the impact of the war on Europe’s economy remains significant. Higher energy costs have reduced industrial competitiveness against the US and China, contributing to economic slowdowns, inflation, and an ongoing cost-of-living crisis. Ukraine stands to lose approximately $800 million annually in transit fees, while Gazprom faces losses close to $5 billion in gas sales.
Moldova, one of the hardest-hit countries, has been forced to implement measures to reduce its gas consumption by a third. The loss of Russian gas, once a dominant force in the European market, signals a major shift in the region’s energy landscape, with the war in Ukraine all but decimating Gazprom’s foothold in Europe.
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