Natural gas ceased flowing through a pipeline connecting Russia and Ukraine on Wednesday, according to officials from both nations.
The cessation of gas flow, although anticipated, could have significant repercussions for Europe’s energy sector and may impact Moscow’s capacity to finance its military operations in Ukraine.
Ukraine opted not to renew an agreement that permitted the transit of Russian natural gas through the pipeline to Europe. This agreement had remained in effect even after Russia's invasion of Ukraine in 2022, marking the beginning of the most intense European conflict since World War II.
The Urengoy-Pomary-Uzhgorod pipeline, established during the Soviet era, was designed to transport Siberian gas to European markets. It served as the primary route to Ukraine’s border with Slovakia and traversed the town of Sudzha, currently under Ukrainian military control, in Russia’s Kursk region.
This pipeline represented Russia’s last significant gas corridor to Europe following the sabotage of the Nord Stream pipeline to Germany in 2022 and the closure of a route through Belarus to Poland.
President Volodymyr Zelensky of Ukraine had cautioned for months regarding the non-renewal of the five-year contract, which expired at midnight on December 31. The contract was established prior to Russia’s invasion of Ukraine, but after its annexation of Crimea.
Ukraine, alongside its Western allies, aims to weaken Moscow’s war funding capabilities and reduce the Kremlin's leverage in Europe through energy supplies. Analysts estimate that the pipeline's closure could diminish Russia’s gas revenue by approximately $6.5 billion annually.
However, this decision carries risks for Ukraine, as Russia may retaliate by targeting Ukraine’s pipeline infrastructure, which has largely avoided attacks thus far, according to military analysts.
The expiration of the gas transit agreement was anticipated, allowing European nations to prepare adequately. It is not expected to significantly impact gas prices due to the availability of alternative supplies.
Following the invasion of Ukraine in 2022, Moscow curtailed gas deliveries to Europe, raising energy costs and compelling numerous governments to introduce emergency financial support for struggling businesses and households. In response, most European Union member states reduced their dependence on Russian gas and sought alternative sources from countries such as Azerbaijan.
In 2021, Russia accounted for over 40 percent of the EU’s imported gas consumption, but this figure has sharply declined since the onset of the war in Ukraine, falling to less than 15 percent last year.
Last year, the pipeline through Ukraine contributed to approximately 5 percent of Europe’s gas imports, but its closure could impact supply in an already constrained market.
The disruption may further strain an already pressured sector. European natural gas markets have experienced volatility this year, with benchmark prices rising more than 50 percent over the past year, although they remain significantly lower than the peaks observed shortly after the Russian invasion.
Market observers are more concerned about the increased complexity and costs associated with securing alternative gas supplies rather than the risk of gas shortages. Natural gas prices in Europe are currently about four times higher than those in the United States.
Natasha Fielding, head of European gas pricing at a market research firm, noted that the closure will likely increase the cost of obtaining alternative gas supplies for countries like Slovakia, Austria, and the Czech Republic.
Despite the Russian invasion, three EU member states—Austria, Hungary, and Slovakia—continued to import substantial amounts of Russian energy.
The Austrian government stated that it had proactively secured suppliers outside of Russia. OMV, the Austrian energy company, announced last month that it had terminated contracts with Gazprom and is "well-positioned" with alternative sources.
Hungary, which advocated for the continuation of the Ukrainian pipeline, primarily receives its Russian gas through the separate TurkStream pipeline.
Slovakia’s Prime Minister Robert Fico has maintained a friendly relationship with Russia’s leadership and the country remains heavily dependent on Russian gas. Fico previously threatened to cut electricity supplies in retaliation against Ukraine if the gas transit deal was not extended, although Slovakia's economy minister assured that the country would not face shortages.
Other European nations outside the EU, including Serbia and several countries in the Balkans, have also continued to purchase gas from Russia. Moldova, bordering Ukraine, is likely to be the most affected European nation. In December, Moldova declared a state of emergency due to concerns that halting Russian gas supplies through Ukraine could jeopardize its primary electricity source—a gas-fueled power plant in the breakaway, Russian-backed region of Transnistria. Officials have indicated that electricity imports from neighboring Romania should help Moldova avert an energy crisis.
On Wednesday, the energy company in Transnistria announced that it would cease supplying gas for heating to residential customers, although it would continue to provide gas for cooking until network pressure reaches a critical level.
This decision by Russia, which risks harming its own proxies in Transnistria—occupied by Russian troops for over three decades—illustrates how the ongoing war in Ukraine has shifted Moscow's priorities.