Kyiv/London
CNN
—

Ukraine has made good on its promise to stop transporting Russian gas to Europe through its territory after a key contract with Moscow expired on Wednesday.

Ukraine’s refusal to extend the transit agreement was an expected but symbolic step after nearly three years of all-out war with Russia and comes after Europe has already sharply cut Moscow’s share of its gas imports. Ukraine’s Energy Ministry said it terminated the deal “in the interests of national security.”

“We have stopped the transit of Russian gas. “This is a historic event,” the ministry said in a statement, adding that its gas transmission infrastructure had been prepared ahead of the expiry.

Last year, Kremlin-owned gas giant Gazprom, which signed the transit deal with Ukraine’s Naftogaz in 2019, posted a $6.9 billion loss, its first in more than 20 years, due to lower sales to Europe, Reuters reported. And this despite efforts to boost exports to the new customer country China.

According to the news agency, Ukraine now faces an annual loss of about $800 million in transit fees from Russia, while Gazprom will lose nearly $5 billion in gas sales. Several European countries that still buy Russian gas had previously agreed alternative delivery routes, it said.

According to the Brussels-based think tank Bruegel, the expired deal had accounted for about 5% of the European Union’s total gas imports, supplying mainly Austria, Hungary and Slovakia. Now, after the term expires, Europe will receive pipeline gas from Russia via a single route: the Turkstream pipeline, which runs through Turkey and on to Bulgaria, Serbia and Hungary, says Bruegel.

Henning Gloystein, head of energy, climate and resources at Eurasia Group, said the end of the deal was “no surprise” but expected it to trigger a rise in spot gas prices when markets reopen on Thursday .

But “a major price increase, as seen in Russia’s previous supply cuts, is unlikely as EU importers have long been preparing for this scenario,” he told CNN, adding that winter is over in most parts Europe started mildly.

The European Union has been working with countries for over a year to prepare for the possible expiry of the agreement, a European Commission spokeswoman told CNN.

“The European gas infrastructure is flexible enough to deliver gas of non-Russian origin to (Central and Eastern Europe) via alternative routes,” the spokeswoman said. “Since 2022, it has been reinforced by significant new (liquefied natural gas) import capacity.”

“We did our homework and were well prepared for this scenario,” Austria’s Energy Minister Leonore Gewessler said in a statement early Wednesday, adding that the country’s energy companies had been looking for new, non-Russian suppliers.

However, according to a Reuters report, Slovak Prime Minister Robert Fico said on Wednesday that stopping Russian gas supplies via Ukraine would have a “drastic” impact on the EU, but not on Russia.

Fico had previously argued that ending the deal would lead to higher gas and electricity prices in Europe, the news agency said.

Before Russia launched its full-scale invasion of Ukraine in 2022, Russia was the European Union’s largest supplier of natural gas. The bloc has cut Russia’s share of its pipeline gas imports from over 40% in 2021 to around 8% in 2023, according to the European Council.

To fill this gap, Europe has imported large quantities of liquefied natural gas (LNG) – a cooled, liquid form of natural gas that can be transported by sea tankers – from the United States and other countries, as well as pipeline gas from Norway. The EU has also increased imports of Russian LNG to heat its homes and power its factories, but faces a self-imposed deadline of 2027 and plans to end its dependence on all Russian fossil fuels.

Analysts told CNN last month that countries that receive Russian gas through the transit agreement with Ukraine are not at risk of energy shortages and would likely fill that gap by importing more LNG or more natural gas via pipelines from other European countries.

Still, Massimo Di Odoardo, a senior natural gas researcher at energy data firm Wood Mackenzie, told CNN in late December that the expiration of the deal would make it harder for Europe to replenish its supplies before next winter. This is one of the reasons why European gas prices are likely to remain close to their current levels or perhaps rise in 2025, he said.

Prices have fallen from all-time highs reached in summer 2022, but are still more than twice as high as in the past.

There are already signs of tension in the region. Reuters reported on Wednesday that Transnistria, a breakaway region of Moldova, a non-EU country that also receives Russian gas through Ukraine, cut off heating and hot water supplies to households after the transit agreement expired.