European gas prices hit a 15-month high on Thursday after Ukraine blocked the transit of Russian gas from its territory to the EU.
Russian state-run firm Gazprom is set to lose more than $5 billion a year following the closure of the route, which Ukrainian President Volodymyr Zelensky has called “one of Moscow’s biggest defeats.”
Kiev will lose about $800 million in transit fees from Moscow.
Despite the rise in gas prices on Thursday, the impact on Europe is likely to be limited, said energy analyst Thomas O’Donnell, global fellow at the Berlin-based Wilson Center.
O’Donnell explained, “There was a lot of preparation for this. It’s basically priced in. Of course, there are going to be winners and losers to some extent. Some countries are more dependent on it than others – e.g. For Slovakia and Hungary and Austria.” VOA.
“Austria is very well prepared. They have alternative supply arrangements from Germany and Italy and others. And Slovakia will not be short of gas. They will have gas in abundance. It’s just that they, like everyone else, Will have to pay more all along,” he said.
Moldova was one of the countries most dependent on Russian gas supplied through Ukraine. In the breakaway region of Transnistria, which is controlled by the Russian military, heating and hot water supplies were cut off to residents on Wednesday as authorities urged people to dress warmly and use electric heaters.
ukraine war
Ukraine’s Zelensky indicated last month that he would not renew a five-year contract to allow the transit of Russian gas into his country, which expired on December 31, explaining that he no longer expects Moscow to ” Will not give us the opportunity to earn additional billions on our blood.”
Russia launches a full-scale invasion of Ukraine in February 2022. O’Donnell said Europe has since managed to wean itself off Moscow’s gas supplies more quickly than Russian President Vladimir Putin expected.
“They thought it would force all the European countries that get this gas into a situation where they would surrender – and they would be unwilling to support Ukraine in the war, and unwilling to show their solidarity. They also thought the war would end in three or four days, but it didn’t work,” O’Donnell said.
“They have essentially lost their entire European market. The world’s second-largest gas fields in Western Siberia now have no outlet,” he said. “Putin portrays himself as a great Russian nationalist. Well, this great Russian nationalist just lost one of the biggest businesses Russia has ever seen.”
In 2023, Gazprom reported a loss of nearly $7 billion, its first annual loss since 1999.
slovakia anger
Slovakia’s Prime Minister Robert Fico, who has close relations with Putin, has strongly criticized Ukraine’s decision. Putin hosted FICO in Moscow last month, where the two leaders reportedly discussed the future of Russia’s gas exports.
Fico also opposes Western support for Kiev in the war against the Russian invaders. Speaking on Wednesday after Ukraine scrapped a transit deal, Slovakia’s leader accused the EU of sacrificing the interests of smaller states.
“We must look at the selfish national interests of the big [member states] And meaningless geopolitical goals are beginning to dominate this community… while ignoring the needs of smaller people,” Fico said in a televised address. ”When gas transit through Ukraine stops, [it] “This will have a serious impact on all of us in the EU, but not on the Russian Federation.”
European dependency
In fact, the EU has drastically cut its dependence on Russian gas since Russia’s invasion of Ukraine in February 2022. Moscow supplied more than 40% of the bloc’s gas in 2021, but that was expected to fall to about 8% by 2023, according to EU data.
Europe has found new suppliers, O’Donnell said.
“Norway has made every effort to increase its supplies and it has been extremely helpful. They are now on the same scale as Russia used to be,” he said.
“Number two, the United States increased its supplies to Europe,” he said. “This was very significant. In 2023, about 67% [liquefied natural gas] It is exported from America, a large quantity of which was going to Europe. And it supplied 47% of their LNG. I think in 2024, it looks like it supplied about 37%.”
EU-US trade
EU officials have signaled the bloc will seek to strengthen its energy trade with the United States under its next president, Donald Trump.
EU Commission spokesman Olof Gil said on 20 December, “We look forward to discussing with President-elect Trump how we can further strengthen our already strong relationship, including by discussing our common interests in the energy sector.” also includes.” Well, the EU is committed to phasing out energy imports from Russia and diversifying our sources of supply.”
However, Slovakia’s Fico has threatened to cut off the transit of European electricity to Ukraine in retaliation for Kiev’s decision to block the transit of Russian gas.
Russian gas imports through Ukraine were to account for about 5% of Europe’s total supply in 2024. Some gas was shipped through Slovakia to Western Europe, O’Donnell said — and that largely explains FICO’s concerns.
“Slovakia was earning almost half a billion dollars on transit fees [Russian] Transport gas across your country to others through your pipeline system – hence, redistribute the gas,” he said.
‘security risk’
Social media site? What is he being paid, and what does he pay?” Zelensky wrote on December 23.
Moscow’s other supply routes to Europe are limited. The Yamal-Europe pipeline through Belarus was closed in 2022 following a payment dispute between Russia and Poland and has not been reopened.
Months later, the Nord Stream pipeline running under the Baltic Sea to Germany was blown up. It is unclear who was responsible.
Russia is still able to supply gas to Hungary, Turkey and Serbia through the TurkStream pipeline.