Russian gas exports to Europe via Ukraine halted as transit deal expires

Russian natural gas exports via pipelines running through Ukraine to Europe were halted in the early hours of New Year's Day as a transit deal expired and warring Moscow and Kyiv have failed to reach an agreement to continue the flows.

The shutdown of Russia's oldest gas route to Europe ends a decade of fraught relations sparked by Russia's seizure of Crimea in 2014. Ukraine stopped buying Russian gas the following year.

"We stopped the transit of Russian gas. This is a historic event. Russia is losing its markets, it will suffer financial losses. Europe has already made the decision to abandon Russian gas," Ukraine's Energy Minister German Galushchenko said in a statement.

The stoppage of gas flows was expected amid the war, which started in February 2022. Ukraine has been adamant it would not extend the deal amid the military conflict.

According to an industry source, Gazprom last year assumed the absence of the gas transit via Ukraine, which accounted for roughly a half of Russia's total pipeline gas exports to Europe.

Russia still exports gas via the TurkStream pipeline on the bed of the Black Sea. TurkStream has two lines - one for the Turkish domestic market and the other supplying central European customers including Hungary and Serbia.

The European Union redoubled its efforts to reduce its dependence on Russian energy after the outbreak of the military conflict in Ukraine in 2022 by seeking alternative sources.

The remaining buyers of Russian gas via Ukraine such as Slovakia and Austria have also arranged alternative supply.

Moldova, once part of the Soviet Union, is among the countries worst affected. It says it will now need to introduce measures to reduce its gas use by a third.

There were no immediate comments from Europe in the early hours of Wednesday.

The five-year gas transit deal between Russia and Ukraine expired early on January 1.

"Due to the repeated and clearly expressed refusal of the Ukrainian side to renew these agreements, Gazprom was deprived of the technical and legal ability to supply gas for transit through the territory of Ukraine from January 1, 2025," Gazprom said in a statement on the Telegram messaging app.

"Starting from 08:00 Moscow time (0500 GMT), the supply of Russian gas for its transportation through the territory of Ukraine is not carried out."

Ukraine's energy ministry also said the transportation of Russian gas through Ukraine "has been stopped in the interests of national security".

Ukraine now faces the loss of some $800 million a year in transit fees from Russia, while Gazprom will lose close to $5 billion in gas sales.

Russia and the former Soviet Union spent half a century building up a major share of the European gas market, which at its peak stood at around 35 per cent, but the war has all but destroyed that business for Gazprom.

The Yamal-Europe pipeline via Belarus has also shut and the Nord Stream route across the Baltic Sea to Germany was blown up in 2022.

Combined, the various routes delivered a record high 201 billion cubic metres (bcm) of gas to Europe in 2018.

Russia shipped about 15 bcm of gas via Ukraine in 2023, down from 65 bcm when the last five-year contract began in 2020.