Following the announcement of the halt in Russian gas exports to Europe via Ukraine, gas prices in Europe surged to $536 per thousand cubic meters.
Although European officials stated that they are prepared to transfer gas from another route, this brief news caused concerns for European countries and increased gas prices, with the cost of gas futures for February on the TTF exchange in the Netherlands rising to over $536 per thousand cubic meters or €50 per megawatt-hour.
Along with European countries, Moscow will also suffer losses from the halt in gas exports to Europe, losing a significant portion of its gas export destinations, especially during the current war.
Time of gas transfer halt
Gazprom announced that the transfer of Russian gas to Europe via Ukraine will be halted at 8 a.m. Moscow time on January 1, as the contract between the two parties comes to an end. The Ukrainian government had previously stated that it was not willing to extend the five-year contract for the transit of Russian gas to Europe.
This halt will deprive the European market of around 15 billion cubic meters of gas annually. With the halt of Gazprom's exports to Europe, the Balkan Stream pipeline will be the only route for the transfer of Russian gas to Europe. (This pipeline route passes through Turkey and the Black Sea to Bulgaria, then to Hungary, and from there to Serbia, Bosnia, and Herzegovina.)
Moscow's losses from the halt in gas exports to Europe
In this context, the Al-Sharq Al-Awsat newspaper wrote that Russia's gas exports to Europe will be halted on January 1, 2025, after the five-year gas transit contract between Moscow and Kyiv expires, "dealing a near-fatal blow to Moscow, which once dominated the European gas market." During this period, European countries have restructured their energy sector and replaced Russian gas with gas from the US and Qatar.
European Union reacts to the gas transit halt
The European Commission on Tuesday responded to the continuous criticism of Slovak Prime Minister Robert Fico, emphasizing that the EU is prepared for the cessation of Russian gas transiting through Ukraine.
The Commission's spokesperson stated that Europe's gas infrastructure is flexible enough to supply Central and Eastern Europe with gas from non-Russian sources using alternative routes.
He claimed that the impact of halting gas transit through Ukraine on the EU's gas security is limited.
Ukraine, which has been at war with Russia for nearly three years, will stop the transit of Russian gas through its territory as of the new year. Kyiv has long announced that it will not renew the contract. The gas transit halt will create a particular challenge for Slovakia.
About half of Russia's gas goes to Europe via the Ukrainian route, while the rest is supplied through the TurkStream pipeline, which passes through the Black Sea.
According to Al-Sharq Al-Awsat, Russia's exports of super-cooled liquefied natural gas (LNG) transported by sea are increasing, with Europe accounting for about half of these exports.
The report states that the EU has no immediate plans to stop buying LNG from Russia, but it has announced that it will strive to completely eliminate its dependence on Russian gas by 2027, given the increased exports from Norway, the United States, and Qatar.
Deputy prime minister of Russia's response to the halt in gas exports
In this context, the Deputy Prime Minister of Russia had stated: In the first 11 months of 2024, the total supply of pipeline and liquefied gas from Russia to Europe, despite all sanctions, increased by an average of 18 to 20 percent.
The Russian company Gazprom supplied about 15 billion cubic meters of gas through this route in 2023, accounting for 4.5 percent of the EU's total consumption.
The Deputy Prime Minister of Russia, on the eve of the expiration of the gas transit contract with Ukraine due to Kyiv's refusal to extend it, told Russian television: We are ready to continue gas exports to Europe through various other routes.
He added, Russia is prepared to deliver gas to Europe through multiple routes, not just through transit via Ukraine; although this has not been realized today, even though Europeans are interested in it.
Novak had said, the current situation of gas reserves in Europe is inappropriate, and it will worsen after the halt in Russian gas supply. According to him, gas reserves in European storage facilities are currently 3 to 5 percent lower than the five-year average.
Quadrupling of gas transit tariff in Ukraine
Also, Ukraine will quadruple the gas transit tariff for consumers as of January 1 to compensate for the lost revenue after the end of the gas transit agreement with Russia.
Ukraine's regulator approved the decision to increase the domestic gas transit tariff from $2.95 to $11.95. Dmitry Lipa, the General Director of Ukraine's gas transmission operator, stated that 85 percent of our revenue in 2024 was from the transit of the Russian Federation's gas. This means that only 15 percent of our revenue was from domestic consumers. Ukraine earned one billion dollars annually from the gas transit tariff from Russia.
It is noteworthy that the gas transit contract between Russia and Europe via Ukraine, signed in 2019, expired on December 31.
NOURNEWS