Russian gas supply to Europe stops after Ukraine refuses to renew transit deal

Russian gas exports via Soviet-era pipelines running through Ukraine came to a halt on New Year's Day, marking the end of decades of Moscow's dominance over Europe's energy markets.

The gas had kept flowing despite nearly three years of war, but Russia's gas firm Gazprom said it had stopped at 0500 GMT after Ukraine refused to renew a transit agreement.

The widely expected stoppage will not impact prices for consumers in the European Union - unlike in 2022, when falling supplies from Russia sent prices to record highs, worsened a cost-of-living crisis and hit the bloc's competitiveness.

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The last remaining EU buyers of Russian gas via Ukraine, such as Slovakia and Austria, have arranged alternative supply. Hungary will keep receiving Russian gas via TurkStream, which runs two pipelines under the Black Sea.

Transdniestria, a breakaway pro-Russian region of Ukraine's neighbour Moldova also reliant on the transit flows, cut off heating and hot water supplies to households early on Wednesday.

The European Commission said the EU had prepared for the cut-off.

"The European gas infrastructure is flexible enough to provide gas of non-Russian origin," a spokesperson for the Commission said. "It has been reinforced with significant new LNG (liquefied natural gas) import capacities since 2022."

Since the start of the war in Ukraine, the EU has slashed its dependence on Russian energy by buying more piped gas from Norway and LNG from Qatar and the United States.

Ukraine, which refused to extend the transit deal, said Europe had already made the decision to abandon Russian gas.

"We stopped the transit of Russian gas. This is a historic event. Russia is losing its markets, it will suffer financial losses," Ukraine's Energy Minister German Galushchenko said in a statement.

COST TO BOTH SIDES

Ukraine now faces the loss of some $800 million a year in transit fees from Russia, while Gazprom will lose close to $5 billion in gas sales.

Russia and the former Soviet Union spent half a century building up a major share of the European gas market, which at its peak stood at around 35%, but the war has all but destroyed that business for Gazprom.

The Yamal-Europe pipeline via Belarus has also shut and the Nord Stream route across the Baltic Sea to Germany was blown up in 2022.

Combined, the various routes delivered a record-high 201 billion cubic metres (bcm) of gas to Europe in 2018.

Russia shipped about 15 bcm of gas via Ukraine in 2023, down from 65 bcm when the last five-year contract began in 2020.

In Transdniestria, an employee at local energy company Tirasteploenergo told Reuters that it had cut off heating and hot water supplies to households, and she did not know when they would resume.

The company urged residents to dress warmly, gather family members together in a single room, hang blankets or thick curtains over windows and balcony doors, and use electric heaters.