How Ukraine ended the era of Russian gas transit

On January 1, 2025, the contract between Naftogaz and Gazprom expired, and Russian gas no longer passes through the Ukrainian gas transmission system. This was the final point in the 41-year history of the Urengoy-Pomary-Uzhhorod pipeline, ending the era of Russian dominance in the European gas market.

Forbes Ukraine writes about it.

How the era of Russian dominance in the gas market ended

After the collapse of the USSR, Ukraine was a key transit country for Russian gas to Europe, transporting up to 146 billion cubic meters of gas annually. At the same time, Ukraine imported gas for its own domestic needs, which led to barter schemes and corruption scandals.

Since the 2000s, Russia has gradually tightened its demands. In 2006 and 2009, gas conflicts led to a halt in gas supplies, leaving Europe facing an energy crisis.

In 2014, Ukraine began to sue Gazprom over unfavorable contract terms. In 2018, the Stockholm Arbitration Court ordered Gazprom to pay $2.6 billion for "under-transit". Since then, Ukraine has stopped buying Russian gas and switched to European suppliers.

In 2019, Naftogaz and Gazprom signed a transit contract that was valid until the end of 2024. Despite the Russian invasion of Ukraine, gas transit continued, bringing Ukraine about $1 billion annually.

However, the war changed priorities. The Ukrainian government decided not to extend the transit contract to avoid financial support for the aggressor. In addition, in recent years, Europe has significantly reduced its dependence on Russian gas, cutting its consumption by three times.

The termination of transit will hit the revenues of Ukraine’s Gas TSO, which received 80% of its profits from transit. At the same time, the costs of maintaining the system far exceed revenues. This would also affect the country’s balance of payments and could raise gas tariffs for domestic consumers by 5-10%.

For Europe, the termination of transit through the Ukrainian GTS was a logical step towards a complete rejection of Russian gas by 2027. Currently, Russia accounts for only 18% of Europe’s gas imports.

In total, Russian Gazprom paid about $33 billion for transit services between 2010 and 2024.

The decision to stop transit is not only economic but also political. Ukraine got rid of its dependence on its "dangerous partner", emphasizing its energy independence. Europe, on the other hand, continues to move towards diversifying its energy sources, leaving Russia without its main leverage.

As a reminder, the PMR has agreed to receive gas through the Moldovan state-owned company Moldovagaz. This step could be a new milestone in relations between Transnistria and Moldova amid difficulties with energy supply.

We also wrote that Gazprom promised to resume gas transit to the PMR. However, the company did not name an exact date or a supply route.