Cold Shoulder: Ukraine Ends Russian Gas Shipments to Europe, Sending Winter Energy Prices Soaring

Despite nearly three years of war Russian energy has continued to transit unimpeded through Ukrainian territory every day, until now, with the taps being firmly closed on New Year’s Day.

Zero Russian gas is flowing to European customers through Ukrainian pipelines for the first time in decades today, confirmation there was to be no last-minute deal to keep the route open sending energy prices spiking on Tuesday. The route has seen billions of cubit feet of gas delivered since the end of the Cold War, and a five year contract between Moscow and Kyiv governing the transit of gas continued to be observed, remarkably, right to the last moment when it expired at midnight.

But no new contract has been signed, and Ukraine through its state media has announced today they “ceased the transportation of Russian natural gas through its territory in the interests of national security”. Its energy minister said: “We have blocked the transit of Russian gas, this is a historic event. Russia is losing markets, it will suffer financial losses”.

Russia overlooked its own role in the Russian invasion of Ukraine and pointed all blame at Kyiv for stopping the transit of energy to Europe, stating today: “As Ukraine repeatedly and clearly refused to extend these agreements, Gazprom was deprived of the technical and legal ability to supply gas for transit through Ukraine from January 1, 2025. The supply of Russian gas for its transportation through Ukraine stopped at 8:00 a.m. Moscow time”.

Indeed, Russia is — per The Times — due to lose out on $5 billion in gas sales a year from the pipeline shutting down, assuming it can’t find alternative transit routes and markets for the product, as Moscow has already done in the recent past.

Ukraine faces losses of its own, however, as it stands to lose its $800 million a year cut for transiting Russian gas to European Union customers. This will almost certainly be compensated by Ukraine’s financial backers.

Probably missing out the most are the few remaining major customers for comparatively cheap Russian energy in central Europe. While Russian gas was the main source for Europe before the war, most energy shocks having been experienced at the beginning of the conflict and with the loss of the Nord Stream pipes and it has now been replaced with LNG imports. While this has kept the lights on, it has been at a great cost for European industry and consumers, who have seen their energy bills soaring to historic highs.

For that handful of central European nations who do not have access to the sea and consequently easy LNG imports, cheap and plentiful Russian gas has remained an important, even dominant energy source even through the war. The European Union has moved to reassure central European countries that they will be able to get gas from elsewhere through the continent’s pipeline networks, saying this could be achieved through LNG imports.

Hungary and Slovakia have lost both their main source of gas and government fees for transit onwards to other Euro states, but they theoretically at least have enough gas in reserve to get through the winter. The challenge comes with keeping those reserves topped off, which will be more expensive from now on.

Slovakia’s Prime Minister Robert Fico — derided in most European capitals for being too friendly with Russia, and who was shot in 2024 by a political activist over his disinclination to involve Slovakia in the Ukraine war — has even threatened to take action against Ukraine for refusing to allow future gas transits. Last month he said losing Ukrainian-transit Russian gas would load tens of billions in higher energy costs onto European nations and threatened to cut Slovak exports of electricity to Ukraine in retaliation.

Ukraine has become more reliant on electricity imports from its neighbors as the war rolls on and its domestic generation capability has been eroded by military action. As reported, Ukrainian electricity imports from Slovakia rose 150 per cent in 2203.

The Ukraine route accounted for around half of all Russian gas imports still making it into Europe by the end of 2024. Now it has closed, the final remaining route is the Turkstream through Turkey into south-eastern Europe. Entering 2025, Russian gas exports to Europe are around eight per cent of what they were before the war against Ukraine.