twitter
youtube
instagram
facebook
telegram
apple store
play market
night_theme
ru
arm
search
WHAT ARE YOU LOOKING FOR ?






Any use of materials is allowed only if there is a hyperlink to Caliber.az
Caliber.az © 2024. .
WORLD
A+
A-

Europe prepares for end of Russian gas transit through Ukraine

10 September 2024 19:55

Ukraine, with its vast network of over 22,000 kilometers of natural gas pipelines, has been a pivotal player in Europe's energy markets for decades.

However, by the end of this year, these strategic assets could become stranded, as the agreement between Moscow and Kyiv for Russian gas transit to Europe is unlikely to be renewed before its expiration in December, Caliber.Az reports, citing foreign media.

This potential halt in gas flows, which have persisted despite more than two years of full-scale invasion, could hit European markets at a critical time, as heating season approaches. "The end of transit through Ukraine really represents the end of an era that has been slowly simmering," said Margarita Balmaceda, a professor of international relations at Seton Hall University specializing in the energy politics of post-Soviet states.

For Europe, this development introduces new uncertainty to already tight energy markets, while Russia stands to lose one of its last remaining pipeline routes to Europe. However, Ukraine may face the greatest consequences, potentially losing significant transit fees that are vital for maintaining its energy infrastructure and strategic role as a key energy conduit for its Western allies. 

For over five decades, the flow of natural gas has linked Russia, Ukraine, and Europe. Since the collapse of the Soviet Union, transit disputes have been a recurring issue in Russian-Ukrainian relations, with supply disruptions in 2006 and 2009 leading to gas shortages in Europe during harsh winter conditions. The current transit agreement between Ukraine's state-run energy company Naftogaz JSC and Russia's Gazprom PJSC, established in late 2019, now accounts for less than 5% of Europe's gas supplies.

However, even this reduced flow remains critical for energy security. Ukraine stands to lose up to $800 million annually in transit fees, a figure that has already dwindled to about a third of previous levels, according to estimates from Mykhailo Svyshcho, an analyst at Kyiv-based ExPro Consulting. While this loss is minor compared to the billions Russia has forfeited from European customers since its 2022 invasion of Ukraine, it is still a significant blow to Kyiv. Moreover, reviving the pact alone may not be enough to restore the flows, given Russia's recent attempts to weaponize energy links. European customers, particularly Germany, have largely moved away from reliance on Russian gas. 

Germany, which once depended on Russia for more than half of its gas needs, has increased pipeline deliveries from Norway and ramped up liquefied natural gas (LNG) imports from around the world, rendering it independent of Ukraine's pipelines. However, some opposition parties and business leaders in Germany continue to advocate for a return to cheaper Russian pipeline gas, with the Ukraine route remaining a viable option following the sabotage of the Nord Stream pipeline in September 2022. Austria and Slovakia, the primary recipients of the gas still flowing through Ukraine, are preparing to move on from Russia-linked pipelines. Slovakia's largest gas supplier, SPP, expressed confidence in its readiness for winter, while Austria is operating under the assumption that gas flows via Ukraine will cease in January, potentially allowing it to terminate contracts with Gazprom. 

Moscow, meanwhile, has other routes available for gas exports, including pipelines via Turkey, expanding links with China, and LNG shipments. However, the loss of Ukrainian transit volumes could result in a roughly $6.5 billion annual revenue loss for Russia at current prices, according to Bloomberg calculations. This financial incentive could motivate the Kremlin to consider renewing the deal, with President Vladimir Putin recently indicating his willingness to continue gas transit through Ukraine beyond 2024. Ukraine, eager to maintain its network's relevance, has vowed to exclude "Russian molecules" from its transit system to cut off funds to the Kremlin. Kyiv is seeking alternative suppliers to leverage its pipeline assets, but the absence of Russian gas could make the network an even more attractive military target. 

Discussions with Azerbaijan, which already supplies gas to eight European countries, are underway, but Azerbaijan's production is insufficient to fully substitute Russian gas in the short term. With energy markets still delicately balanced, the almost certain loss of the Ukrainian transit route could lead to volatility in European markets. Disruptions in Norway or challenges with LNG shipping, combined with a cold winter, could drive prices higher. "There still could be a shortage during this heating season," warned Frank van Doorn, head of trading at Vattenfall Energy Trading GmbH. "Realistically, we haven't been tested yet, given that the last two winters were mild."

Caliber.Az
Views: 79

share-lineLiked the story? Share it on social media!
print
copy link
Ссылка скопирована
WORLD
The most important world news