Flow of Russian gas to the EU via Ukraine could stop next year, Kyiv says

Russia could shut down one of the last arteries carrying Russian gas to Europe by the end of next year. Ukraine’s gas transit contract with Gazprom expires next year, and the chances of Kyiv and Moscow agreeing to extend the five-year transit deal signed in 2019 are slim. Ukrainian Energy Minister Herman Halushchenko said this in an interview with the Financial Times (FT). The route through Ukraine accounts for almost five per cent of Europe’s total gas imports.

„I really can’t imagine how it could be bilateral,“ Halushchenko said when asked whether Ukraine would be willing to renegotiate the deal with Moscow after last year’s invasion.

He added that Ukraine was preparing for a cut in supplies.

Moscow’s decision last year to cut supplies to Europe triggered an energy crisis, driving up inflation and the cost of living across the continent. The pipeline through Ukraine is one of two routes still carrying Russian gas, albeit in limited volumes. According to data from consultancy ICIS, Russian gas supplies via Ukraine accounted for roughly half of Austria’s gas imports in May and as much as 95 per cent of Slovakia’s.

Europe should be relatively prepared for a further cut in supplies, having adapted to similar reductions in the past by curbing demand and finding alternative import routes, such as supplies of liquefied natural gas (LNG), the minister added.

Last year, the EU invested heavily in LNG imports and adopted regulations to increase storage capacity in order to avert a potential gas shortage after Russian gas supplies to Europe fell following Moscow’s invasion of Ukraine.

Without the transit route through Ukraine, Russian gas will be able to reach Europe only via the TurkStream pipeline. It is used by countries in southeastern Europe and accounted for three per cent of gas supplies to Europe in May.

Halushchenko suggested that European politicians may want to discuss a supply deal. In 2019, a European delegation brokered trilateral talks with Russia and Ukraine. Analysts say, however, that something similar is unlikely to happen this time, as it is difficult to imagine negotiations with Moscow.

The current contract was signed at the last minute in December 2019, roughly 24 hours before the previous deal expired. It secured the flow of Russian gas through Ukraine until the end of 2024. Gazprom agreed to send at least 65 billion cubic metres of gas through Ukraine in 2020 and at least 40 billion cubic metres a year from 2021 to 2024. This secured Ukraine transit revenues of USD 7 billion (CZK 151.3 billion). Russia currently sends only around 12 billion cubic metres a year through Ukraine, and Kyiv complains that it is receiving less money, even though the contract stipulates that it will be paid for the full transit volume regardless of whether the agreed amount is shipped.

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