MOSCOW: Russian gas supplies to Europe via Ukraine are set to end on New Year’s Day, ending Moscow’s long-held dominance of supplies in the European gas market.
Russia’s oldest gas export route to Europe – a pipeline dating back to the Soviet era – was due to close at the end of 2024, as a five-year transit deal between Russia and Ukraine expires. Data from Ukraine’s gas transit operator showed on Tuesday that Russia had made no requests for gas flows as of January 1.
The EU significantly reduced its dependence on Russian gas after the outbreak of war in Ukraine in February 2022, seeking alternative sources of gas.
The remaining buyers of Russian gas, such as Slovakia and Austria, have arranged for alternative supplies, and analysts expect the shutdown to have minimal impact on the market. European benchmark gas prices settled at 48.50 euros per megawatt hour on Tuesday, up only slightly from early trade.
However, the geopolitical significance of stopping the gas flow would be enormous.
Since invading Ukraine, Moscow has lost a dominant share of gas supplies to EU countries to rivals such as the US, Qatar and Norway, forcing the EU to reduce its dependence on Russian gas.
State-controlled Gazprom, once the world’s largest gas exporter, recorded a $7 billion loss in 2023 alone, its first annual loss since 1999.
For Europe, the loss of cheap Russian gas supplies contributed to a major economic slowdown, rising inflation and a worsening cost-of-living crisis.
While Europe has been scrambling to find alternative energy sources, the loss of Russian gas has raised long-term concerns about its declining global competitiveness and Germany’s industrial future in particular.
Russia and the Soviet Union spent half a century carving out a large share of the European gas market, which stood at about 35 percent at its peak, but the war in Ukraine has destroyed Gazprom’s business.