2025 puts an end to one of the great paradoxes of the last three years. Russian gas stopped flowing at midnight this Wednesday to the European Union through Ukraine. It does so for the first time in the almost three years of Vladimir Putin’s invasion, after the Government of Volodymyr Zelensky refused to renew the contract with the Russian state gas company Gazprom beyond its expiration, this Tuesday, December 31. The agreement was sealed at the end of 2019, more than two years before the first Russian missiles hit Ukrainian soil and even in the bloodiest phases of the war, gas has not stopped crossing the subsoil of that country. This morning, Gazprom confirmed in a statement the interruption of supply through the neighboring country towards EU territory.
Although, as the then European Commissioner for Energy, Kadri Simson, “the EU can now live without Russian gas”, fuel receipts through Ukraine are by no means negligible. The Ukraine Transit, as the gas pipeline that has just ceased operation is known, has a maximum capacity of 150 billion cubic meters (bcm) per year. Since May 2022 – still in the early stages of the invasion – the flow has been reduced to around 15 bcm, a minimal fraction of the gas consumed by the Twenty-Seven.
Gazprom announced it would ship just 37.2 bcm on Tuesday, and since the early hours of January 1, flows have fallen to zero. Despite the small number of that figure, the expectation of closure has heated up the price of this fuel in the Old Continent in recent weeks, vital in industry, heating and electricity generation.
Ukraine was the penultimate gateway to the EU for channeled Russian gas; the other is the Turkstream, which crosses Türkiye towards Bulgaria. Unlike oil, community sanctions continue to apply to Russian gas. Largely, out of fear that security of supply will suffer.
The Russian fuel that has flowed during the almost three years of war under Ukrainian soil has fed the gas network of several countries in central and eastern Europe. Above all, three: Austria, Hungary and, especially, Slovakia, where the bulk of the supply ended. Three landlocked countries and, therefore, unable to import directly by ship.
Each of these cases, however, is a world. While Vienna has not received a single cubic meter for just over a month, after the contract between Gazprom and the Austrian energy company OMV was blown up, Bratislava and Budapest are in a radically different position. Their governments are clearly pro-Russian – the Slovak Prime Minister, Robert Fico, and his Hungarian counterpart, Viktor Orbán, are Vladimir Putin’s two greatest supporters in the Twenty-Seven. And Russian gas remains by far its cheapest alternative.
Hence the recent outbreak of revolt, especially in Slovakia, as the flow through Ukraine came to an end. Fico has gone so far as to threaten its eastern neighbor with cutting off its electricity supply if it carries out its threat of not renewing the contract with Moscow, with Poland immediately committing to fill the gap with its own production. In the middle of winter and with its electrical infrastructure severely damaged by Russian bombing, electrical interconnections with its EU neighbors are vital for kyiv.
Russian LNG purchases at maximum levels
The second great paradox – and this one continues without end – is that of Russian gas traveling by ship. The arrivals to the EU of these shipments, from Russian liquefaction terminals, have broken a new historical maximum in 2024, leaving behind the level of 2023. Although the total volume of gas reaching the EU from the Eurasian country has fallen, as As a consequence of the collapse in tube shipments, the increase in the transfer of LNG has artificially compensated for this gap: part of the Russian gas that previously arrived by pipeline, now does so—frozen— on board methane tankers.
These sales by ship, which European partners have not wanted to give up for fear of worsening their security of supply, have allowed Russia to maintain a substantial part of its income. It has also been helped, and in what way, by the new agreements for the supply of gas to China, with the Power of Siberia 1 gas pipeline already operating at full capacity.
Only since the beginning of the invasion of Ukraine, in March 2022, Russia has earned more than 813 billion euros from the export of fossil fuels, according to the . Of that figure, almost 170,000 million correspond to the sale of natural gas, almost 60% with the EU as the final destination.
Consequences for Ukraine
In purely economic terms, researchers estimate that the income that Ukraine receives from allowing the flow of gas to the EU through its territory is around 0.5% of its GDP, about 800 million dollars (770 million euros). per year, while it provides Russia with around 6.28 billion euros each year, “a cash flow that helps replenish its war machinery.” “Those inside Ukraine who advocate a new agreement, both for money and for its relationship with its neighbors to the west, are gravely mistaken,” say Sergii Makogon, Aura Sabadus and Benjamin Schmitt in a recent study with an illuminating title: Betraying Ukraine over blood-stained gas.
The cost of gas transportation will quadruple from this Wednesday, as announced by the National Energy Regulatory Commission of Ukraine (NCRECP) during a meeting held last Monday with businessmen and representatives of the country’s industries. The natural gas transportation rate rises from 124.6 hryvnias (2.87 euros) per 1,000 cubic meters to 501.97 hryvnias (11.54 euros).
At that meeting, the general director of the national gas network operator, Dmitro Lippa, explained that in 2024, 85% of this distributor’s income came from the transportation of Russian gas and only 15% from national customers, and that The increase in prices will not serve to compensate for the economic losses. “The rate increase is not enough for full compensation, but we understand that the economy needs considered decisions,” he said. To balance the balance, Lippa acknowledged that expenses and personnel have also been cut, and that infrastructure that was not being used “and will not be used” has been closed.
Business owners have also complained. At last Monday’s meeting, the director of the Department of Ecology, Energy and Green Economy of the Federation of Employers of Ukraine, Olga Volodimirivna Kulik, warned that for the industry, the price increase represents an increase of six billion hryvnias. annually, about 140,000 million euros. “In war conditions, it is extremely difficult for the economy and industrial companies to resist,” he lamented.
The head of the Metallurgy Federation, Serhii Bilenky, expressed himself along the same lines. For its sector, the increase in annual costs will be about 300 million hryvnias, about seven million euros. “We cannot bear such a significant additional burden,” he stressed. The measure, however, will not affect domestic consumers at the moment, the NCRECP has clarified, so the cost of hot water and heating will not change.
The increase in gas prices is also added to another increase, that of electricity, whose price has almost doubled since June 1, 2024, going from 0.06 euros per kilowatt-hour to 0.10 euros. And this has affected all consumers. The Government justified this measure to help finance the repair of the: The United Nations estimates that Ukraine has lost 60% of its electricity generation capacity in the almost three years of the large-scale Russian invasion, and the Russian attacks have caused damage to the energy sector worth more than $1 billion, according to Energy Minister Herman Halushchenko.
The increase in electricity rates is a very delicate matter for the Government. Because of the war, the poverty rate among Ukrainians has skyrocketed—according to the World Bank, 1.8 million people, a third of the population, live in poverty—one fifth of the population has lost employment, and at least 3.7 million have suffered an increase in the cost of living after being forced to leave their homes.
And economic ones are not the only consequences for Ukrainians. Another side effect is that the country’s gas pipelines become the target of Russian attacks. However, the 38,600 kilometers of the Ukrainian pipeline network, one of the largest in the world, has been spared thanks to the passage of Russian gas. Protecting and repairing them if they are bombed will create new technical challenges that would make it difficult to heat homes during the winter as well as extra economic costs for a country that has already spent many millions to repair the damage caused by the bombs and missiles. Russians.
