Filenews 9 December 2024 - by Daniel Markind
Although in a state of war for about three years, Russia continues to send gas to Europe via pipelines crossing Ukraine. This has kept the revenue stream for both camps while trying to kill each other.
However, the current five-year agreement between the two countries expires on December 31 and may not be renewed. Kiev says it will not enter into negotiations with Russia to extend the deal. It appears that Zelensky's government has decided that the economic cost to itself of cutting off gas transit (it will lose the fees stipulated in the deal) is less than the potential cost Moscow would incur by losing markets and revenues if the deal is not renewed.
In figures, it is estimated that Russia will lose up to €6.5 billion. dollars a year with the termination of the deal. Ukraine's economic losses are estimated at EUR 800 million. dollars: significantly less than Russia's. In addition, Moscow will face the long-term effects of losing share of the gas market and its credibility will suffer. In the long run, not renewing the agreement may change the entire geopolitical equation in the region.
Since 2022, when European nations pledged to decouple from Russian energy supplies following Vladimir Putin's invasion of Ukraine, Russia's share of gas imports to Europe has fallen significantly from the 40% it held. At the same time, Ukraine's share of these exports has fallen to 5% from 11%.
But not all European countries have succeeded in weaning themselves off energy from Russia. Heading into 2025, Austria still imports most of its gas from Russia via Ukraine. Hungary imports 2/3 of its gas from Russia and the Czech Republic has resumed imports from Moscow.
The complex link between politics and economics has one solid proof: the Urengoy-Pomary-Uzhgorod pipeline. A relic of the Soviet era, the pipeline carries natural gas from Siberia through the city of Sudzha – currently under the control of Ukrainian military forces – to Kursk, Russia. It then passes through Ukraine to Slovakia. There the pipeline branches: one pipeline continues to Austria and the second to neighbouring Hungary. If Ukraine carries out its threat and blocks the transit of natural gas through its territory, these states will face economic precariousness, plus they will have to find alternatives to heat their citizens this winter. So far, Ukrainian gas infrastructure has not actually been targeted by Moscow. But if they cease to be necessary for Russia, they could become the No. 1 target of Russian attacks.
The cessation of the Ukraine-Russia gas deal makes the United States an even more important player in the energy market. The shale revolution in the northeastern United States enables Washington to succeed Moscow as the main exporter of natural gas to Europe. In addition, Russian oil is pumped from the Arctic with low-level environmental safeguards, which has already worked in favour of U.S. oil producers, the country's national security, and the environment more broadly. If Ukraine attempts to further isolate Russia, for the U.S. to continue steadily producing oil and gas will have a positive impact in many areas: even ending the conflict sooner than expected.
Performance – editing: Michalis Papantonopoulos
