Kyiv has not renewed the agreement allowing Gazprom to export its gas through its territory. Falling temperatures and lower reserves than in previous years have caused prices to rise on the European futures market.
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A page is turning in the world of energy and the war in Ukraine. Exports of Russian gas to Europe through Ukraine stopped this Wednesday morning, announced the Russian giant Gazprom. The bilateral transit agreement expired and kyiv did not renew it, citing reasons of “national security”.
The price of Dutch TTF, the benchmark European natural gas, climbed more than 4% to reach 51 euros per megawatt hour, its highest level since October 2023, before easing a little, on the first day of trading after stopping the delivery of Russian gas to Europe via Ukraine.
Freezing temperatures in the north of the region pushed prices higher on Thursday morning, against the backdrop of a 5% loss in EU natural gas imports as Russian imports stopped entering the European Union via Ukraine on January 1, after decades of operation, due to the expiration of a transit agreement, raising concerns about accelerating storage withdrawals.
European gas stocks have been emptied at a record pace since 2021, reaching around 75% due to the particularly cold weather in Europe in recent weeks.
According to industry organization Gas Infrastructure Europe, the volume of gas in the bloc’s storage facilities fell by around 19% between the end of September, when the resupply season ends, and mid-December.
There is no risk of an immediate energy crisis or shortage in Europe, and the European Union (EU) does not expect an immediate impact on consumer prices. However, Europe appears more vulnerable to market volatility if it seeks to replace missing natural gas, as gas prices have soared 50% year over year. Rising energy prices could further harm the Union’s competitiveness and increase costs for households.
Prices could also rise if Europe moves to increase its imports of liquefied natural gas (LNG). Central European countries are most vulnerable to losing access to Russian natural gas via Ukraine, although they have an alternative route, TurkStream, to receive Russian natural gas, but this link does not is not sufficient to fully compensate for the loss of the Ukrainian route.
Volodymyr Zelensky also described this ruling as “one of Moscow’s greatest defeats.” “When Putin took power in Russia more than 25 years ago, the annual volume of gas sent via Ukraine to Europe amounted to more than 130 billion m3. Today, gas transit Russia is at zero, which is one of Moscow’s biggest defeats.”wrote the Ukrainian president on social networks.
Europe is considering other solutions
The impact will be felt most in Hungary and Slovakia, for which the Ukrainian transit route met 65% of gas demand in 2023, according to Bruegel. Slovak Prime Minister Robert Fico, well-disposed towards Vladimir Putin and whose country is very dependent on Russian gas supplies, warned on Wednesday of a “drastic impact on all of us in the EU”. This nationalist leader went to Moscow on December 22 to try to find an urgent solution, provoking the anger of Volodymyr Zelensky, who accused him of wanting “help Putin”.
The European Commission has proposed several solutions to help affected countries, including the supply of Greek, Turkish and Romanian gas via the trans-Balkan route.
Overall, there is no concern that the EU will run out of gas this winter, but filling its stocks could be more costly than expected. Gas prices for next summer recently exceeded those for winter 2025-26, which will make resupply more expensive, Bloomberg reports, citing Arne Lohmann Rasmussen, chief analyst at Global Risk Management in Copenhagen, who said : “There is a growing risk that the EU will run out of gas this winter, with an increasing likelihood that the EU will emerge from winter with low levels of gas storage, making resupply costly.”
