Ukraine has officially allowed a pre-war gas transportation deal with Russia to lapse, dealing a financial blow to an already struggling energy giant in the nation. Russian giant Gazprom had struck the transportation deal with Ukrainian gas company Naftogaz in 2019. The deal allowed pipelines from Russia to flow through Ukraine and into the European Union.
The five-year deal expired at the end of 2024 after Ukraine refused its renewal, citing the current war with Russia as the primary reason. Ukrainian Energy Minister Herman Halushchenko posted to the Telegram messaging app that the deal was ended “in the interests of national security,” calling it “a historic event.”
The Gazprom-Naftogaz deal’s expiration was highly suspected since Ukraine’s energy infrastructure had been preparing for it throughout all last year. Ukrainian President Volodymyr Zelensky also said in a post on Telegram that the move reflects “one of Moscow’s greatest defeats.”
Gazprom responded to the deal’s ending on Telegram by blaming Ukraine. The company said Ukraine’s “repeated and explicit refusal to extend these agreements” had deprived Gazprom “of the technical and legal possibility to supply gas for transit through Ukraine starting from January 1, 2025. “Since 8:00 a.m. no Russian gas has been supplied for transportation through Ukraine,” Gazprom added.
Following the outbreak of the war, Gazprom reported a $6.9 billion revenue loss due to decreased sales in Europe. This was its first annual loss in about 20 years despite efforts to trade more with China.
According to CNN, the termination of the deal will cost Russia nearly $5 billion a year in sales. However, Ukraine is also poised to lose about $800 million in transit fees from Russia.
Ukrainian Energy Minister Halushchenko further said this move was in line with Europe’s decision to phase out Russian gas.
According to data from Brussels-based think tank Bruegel, Russia had supplied the European Union with around 40% of its total pipeline gas intake one year prior to the outbreak of the 2022 war.
Since Russia’s invasion of Ukraine, the EU has made it a goal to completely phase out Russian-supplied gas by 2027. The total supply of gas from Russia to the EU has slowly dwindled since then. By the end of 2024, the deal between Gazprom and Naftogaz had represented roughly 5% of the total gas imports. With that deal terminated, the only remaining pipeline originating from Russia that flows into the EU runs through Turkey.
Gas supply has been pouring into the EU from other countries to feel the needed void. European Commission spokesperson Anna-Kaisa Itkonen confirmed that its “gas infrastructure is flexible enough to provide gas of non-Russian origin to Central and Eastern Europe via alternative routes.”
These alternative routes, however, will incur costs on nations such as Slovakia. Despite the Slovakian Economy Ministry’s confirmation that it has enough gas to last through 2025, any future gas supply for the nation seems to be troublesome.
Slovakia previously said it is not completely on board with Ukraine’s decision to terminate the deal. The nation had tried to convince Ukraine to keep supply flowing through its pipeline from Russia. Slovakian government officials, including Prime Minister Robert Fico, have referred to Ukraine’s stance on the issue as irrational.
Fico, who had referred to the deal as being harmful to Slovakia, has previously said the deal’s termination would negatively impact the EU more than Russia.
Other nations have also shown signs of strain due to the change in energy supply. Transdniestria, a breakaway region of Moldova which hosts Russian troops, has reportedly cut its heating and hot water supplies following the termination of the pipeline deal.
Ian Patrick is a freelance reporter. He is the former senior editor and co-creator of FISM News.
