End of an Era: The Final Days of Russian Gas Transit via Ukraine

Russia's gas supply to Europe via Ukraine is set to end with the expiration of a key transit deal. The deal's end marks Russia's decline in the European gas market following the Ukraine war. The fallout has impacted the EU's energy prices and sparked geopolitical tensions.

On Monday, Russia continued supplying gas to its European customers via Ukraine during one of the final days before a crucial transit agreement expires at the end of the year. This marks the dwindling grip Russia once had over the European gas market, a hold that is now almost entirely lost. Starting January 1, Russian gas deliveries via Ukraine will cease as the current five-year contract comes to an end without a renewal, a situation exacerbated by Ukraine's refusal to discuss a new agreement due to ongoing conflict with Russia.

For decades, Russia and the former Soviet Union dominated the European gas market, commanding a substantial 35% share at its zenith. However, the 2022 invasion of Ukraine by Russia significantly undermined this position, leading to an EU policy shift aiming to reduce reliance on Russian gas. As a result, Russia's market share has gradually been overtaken by competitors like Norway, the United States, and Qatar.

The reduction in Russian gas exports to Europe initially drove prices to unprecedented heights, fueling inflation and increasing living costs across the continent. Despite this, the conclusion of the transit deal is unlikely to trigger a repeat of the 2022 spike in EU gas prices due to the relatively small volume of remaining supplies, which accounted for only 8% of the former peak flows. Slovak Prime Minister Robert Fico has hinted at potential retaliatory measures, such as suspending electricity supplies to Ukraine, if gas transit is halted come January 1.

(With inputs from agencies.)