Russian gas era in Europe ends as Ukraine halts transit By Reuters

By Vladimir Soldatkin and Dan Peleschuk

MOSCOW/kyiv (Reuters) – Russian gas exports through Soviet-era pipelines through Ukraine halted on New Year's Day, marking the end of decades of Moscow's dominance over European energy markets.

Gas had continued to flow despite nearly three years of war, but Russian gas company Gazprom (MCX:) said it had stopped at 0500 GMT after Ukraine refused to renew a transit agreement.

The widely expected strike will not affect prices for consumers in the European Union, unlike in 2022, when falling supplies from Russia drove prices to record levels, worsened a cost-of-living crisis and hurt the bloc's competitiveness.

The last buyers of Russian gas in the EU via Ukraine, such as Slovakia and Austria, have agreed to alternative supplies, while Hungary will continue to receive Russian gas via the TurkStream gas pipeline under the Black Sea.

But Transdniestria, a pro-Russian breakaway region of Ukraine's neighboring Moldova that also relies on traffic flows, cut off heating and hot water supplies to homes early Wednesday. Local energy company Tirasteploenergo urged residents to dress warmly, hang thick blankets or curtains over windows and balcony doors and use electric heaters.

Ukrainian President Volodymyr Zelenskiy, writing on the messaging app Telegram, said the end of gas transit through his country to Europe was “one of Moscow's biggest defeats” and urged the United States to supply more gas to Europe.

“The more real partners of Europe there are in the market, the faster we will overcome the latest negative consequences of Europe's energy dependence on Russia,” he wrote.

Europe's “joint task” now, he wrote, was to support the former Soviet Union “in this period of energy transformation.”

The European Commission said the EU had prepared for the cut.

“Europe's gas infrastructure is flexible enough to supply gas of non-Russian origin,” said a Commission spokesperson. “It has been reinforced with significant new LNG (liquefied) import capacities from 2022.”

Russia and the former Soviet Union spent half a century accumulating a significant share of the European gas market, which at its peak was around 35%. But the EU has reduced its dependence on Russian energy since the start of the war in Ukraine by buying more piped gas from Norway and LNG from Qatar and the United States.

Ukraine, which refused to extend the transit agreement, said Europe had already made the decision to abandon Russian gas.

“We stopped the transit of Russian gas. This is a historic event. Russia is losing its markets, it will suffer financial losses,” Ukrainian Energy Minister German Galushchenko said in a statement.

ALTERNATIVE SUPPLIES

Ukraine will lose up to $1 billion a year in transit fees from Russia. To help offset the impact, it will quadruple gas transmission rates for domestic consumers starting Wednesday, which could cost the country's industry more than 1.6 billion hryvnias ($38.2 million) a year.

Gazprom will lose nearly $5 billion in gas sales.

The company stopped supplies to Austria's OMV in mid-November due to a contract dispute, but in recent weeks Russian gas has been arriving in Austria via Slovakia at a rate of around 200 gigawatt hours (GWh) per day. . By January 1, only about 7 GWh per day is expected to flow from Slovakia to Austria, Austrian energy regulator E-Control said.

Slovakia's main gas buyer, SPP, said it would supply its customers mainly via pipelines from Germany and also from Hungary, but would face additional transit costs.

Combined pipeline routes from Russia delivered a record 201 billion cubic meters (bcm) of gas to Europe in 2018.

The Nord Stream route across the Baltic Sea to Germany exploded in 2022 and the Yamal-Europe pipeline through Belarus was also shut down.

Russia will ship around 15 bcm of gas through Ukraine in 2023, up from 65 bcm when the last five-year contract began in 2020.

(1 dollar = 41.9000 hryvnias)