Ukraine on Wednesday fulfilled its pledge to stop transporting Russian gas from its territory to Europe after a landmark deal with Russia expired. Ukraine’s energy ministry said the deal was terminated in the wake of the more than three-year Ukraine-Russia war.
Ukraine’s Energy Ministry declared the decision historic, saying, “We have stopped the flow of Russian gas. This is a historic moment.” He added that Ukraine had well prepared its gas transportation infrastructure even before the expiration of this agreement.
Europe’s less dependence on Russian gas:
In 2019, this gas transportation agreement was signed between Russia’s Gazprom and Ukraine’s Naftogaz. However, Russia has suffered a huge economic blow. Last year, Gazprom posted a $6.9 billion loss for the first time in 20 years. The reason for this is the sharp decline in Russian gas purchases in Europe.
Ukraine used to earn $800 million annually from Russian gas transport. However, now this revenue is going to stop. At the same time, Russia will also suffer a loss of $5 billion, according to reports.
Implications for Europe’s energy:
The deal accounted for 5% of the EU’s total gas imports. This provided gas to Austria, Hungary, and Slovakia. Now gas from Russia to Europe will be available only through the TurkStream pipeline through Turkey.
The European Union had prepared from 2022 to face this situation. The Union has increased its imports of liquefied natural gas (LNG). In addition, there is emphasis on the import of LNG from Norway through pipelines and from other countries including the US.
“We have made preparations to get gas from different suppliers,” said Austrian Energy Minister Leonore Guesseler.
Prices likely to rise in Europe:
According to experts, the termination of this contract is likely to cause a slight increase in spot gas prices. A scenario similar to the large gas price hike seen in 2022 is unlikely. However, this could cause problems for Europe to store gas before next winter.
Gas prices are currently down from their 2022 peak. Still, they are more than double historical levels.
Moldova’s Transnistria region cut domestic hot water and heating supplies after the deal ended, reports stated.
Ukraine’s decision has greatly helped the European Union reduce its dependence on Russian gas. However, due to this, gas prices are likely to increase, and Europe will have to focus more on new energy sources.