EU Faces Gas Supply Crisis as Russian Transit via Ukraine Ends
As of January 1, 2025, Russian gas is no longer scheduled to flow through Ukraine to Europe, signaling a significant shift in energy dynamics between Moscow and Kyiv. Data from Ukraine's gas pipeline operator revealed that deliveries via the primary entry point for Russian gas into Ukraine have ceased completely, coinciding with the expiration of a five-year transit agreement signed in 2019. This development marks a turning point amid the ongoing geopolitical tensions resulting from Russia's invasion of Ukraine.
Ukrainian President Volodymyr Zelensky has firmly ruled out extending the transit deal, which has provided a crucial supply route for Russian gas to European markets. This halt has sent ripples through the European natural gas market, with prices surging above 50 euros per megawatt hour for the first time in over a year as countries throughout Eastern Europe brace for an impending supply crisis.
Despite a decrease in total gas imports from Russia, the European Union (EU) remains partially dependent on Russian supplies. In 2023, Russian gas accounted for less than 10% of the EU's overall gas imports, but certain countries maintain significant ties with Moscow due to geographical proximity and complex political relationships. Notably, EU and NATO members such as Hungary and Slovakia have continued their close economic partnerships with the Kremlin in the face of the ongoing conflict.
With the end of Russian gas transit through Ukraine, the affected nations are expected to rely heavily on their gas reserves and seek alternative sources, particularly in liquefied natural gas (LNG). The recent colder weather, coupled with overcast skies and weak winds, has impeded renewable energy production, prompting these countries to draw more heavily from their natural gas reserves compared to the previous year.
According to the Aggregated Gas Storage Inventory (AGSI) platform, on average, EU nations report their gas storage facilities are approximately 73% full, a significant decline from the 86% capacity observed at this time last year. Analysts warn that an unexpectedly harsh winter or further delays in LNG projects could exacerbate the situation, causing gas prices to escalate closer to 60 euros per megawatt hour in the coming months, as indicated by Capital.com analyst Daniela Sabin Hathorn.
As Europe navigates this critical juncture, the emphasis will likely shift toward securing additional energy supplies and enhancing storage capabilities, with countries scrambling to find immediate solutions to mitigate the impact of the Russian gas supply disruption.
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