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Europe: Russia prepares for end of gas transit through Ukraine as EU reduces dependence on Russian energy

The situation surrounding Russian gas supplies to Europe is becoming increasingly uncertain. Gazprom, Russia’s state-owned energy giant, is reportedly preparing for the possibility that gas transit through Ukraine will stop after December 31, when the current transit agreement expires. This would mark the end of over 50 years of gas deliveries from Siberia to Central Europe via Ukraine. Despite Ukraine’s stance of not extending the deal, Russia has expressed a willingness to negotiate and keep the gas flowing through this route. President Vladimir Putin has also affirmed Russia’s desire to continue using Ukraine as a transit path for gas.

The end of this agreement is part of broader geopolitical shifts that have drastically altered Europe’s energy landscape. Prior to Russia’s invasion of Ukraine in 2022, Russia was Europe’s primary natural gas supplier. However, the war and subsequent sanctions, coupled with the sabotage of the Nord Stream pipeline, have deeply weakened energy ties between Russia and Europe. The EU has since sought to reduce its dependency on Russian energy, turning to alternatives such as US liquefied natural gas (LNG).

As for Gazprom’s plans, the company’s baseline assumption is that Ukrainian transit will cease by 2025, although final decisions on this matter are still awaiting approval from Gazprom’s senior management. This would lead to a sharp decrease in Russian gas exports to Europe and Turkey, with a projected 20% drop in supplies, from over 49 billion cubic meters in 2023 to just under 39 billion cubic meters in 2025. These figures include gas transported via the TurkStream and Blue Stream pipelines, but exclude exports to China, which are expected to grow via the Power of Siberia pipeline.

In 2023, Ukrainian gas transit has already dropped significantly, with only about 15 billion cubic meters flowing through the Urengoy-Pomary-Uzhgorod pipeline, which crosses Ukraine and provides gas to countries like Slovakia. This is just 8% of the volumes seen at the peak of gas exports to Europe in 2018-2019. By comparison, the total gas consumption in the EU in 2023 amounted to 295 billion cubic meters.

In the face of these disruptions, Europe has increasingly relied on US gas imports, while the role of Russian gas in the region continues to shrink. With the ongoing war in Ukraine and the geopolitical tensions that surround it, the future of Russian gas exports to Europe remains highly uncertain.

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