A drop of gas in the ocean of politics: What’s happening in the EU following the halt of gas transit from Russia through Ukraine?
The halt of Russian gas transit through Ukraine two weeks ago has not caused issues for either Ukraine or the EU. Is there a risk of gas shortages and what is happening with prices? This is explored in the material by RBC Ukraine's special correspondent Yuri Doschatov.
The transit of Russian gas through Ukraine stopped on January 1, 2025. As a result, the EU market lost 5% of its gas supply, as approximately 14-15 billion cubic meters were transiting through Ukraine over the past two years.
According to the latest data, gas reserves in Europe and Ukraine are sufficient to get through the winter without significant risks. This is despite the fact that gas consumption this season has been more active than last year. Issues have only arisen in Transnistria, which is facing a gas shortage. However, the situation there is not hopeless – official Chisinau is offering its assistance to the separatist region. Moreover, Russia has the capability to continue gas supplies to the region via Turkey.
By the second decade of January, according to Bloomberg, the storage levels in the EU have dropped to nearly 70%, compared to 86% during the same period last year. This is one of the lowest figures in recent years.
Gas storage is depleting faster
There are several reasons for the increased gas consumption. Firstly, the weather has been colder than last year. The fewer sunny days reduce solar generation capacity. Secondly, in several EU countries, industrial production increased by nearly 6% in 2024, as reported by the FT. Accordingly, gas consumption has also risen.
However, the situation with gas reserves in the EU for the winter period does not cause significant concern, believes the director of energy programs at the "Razumkov Center," Vladimir Omelchenko. According to him, the reduction in reserves is quite justified and not anomalous. Furthermore, the EU has the capacity to increase liquefied gas supplies, so a shortage is not expected.
"Yes, indeed, the gas reserves in underground storage in Europe are currently somewhat lower compared to the average levels of the last five years for this period, but they are higher than in the 2018 season. There are currently no issues with this. Since 2022, gas consumption in the EU has decreased, but the ability to receive LNG (liquefied gas, - ed.) from leading gas-producing countries such as Qatar, the USA, Norway, and others has increased," Omelchenko stated in a comment to RBC Ukraine.
Gennady Ryabtsov, director of the "Psychea" center, also sees no grounds for concern regarding gas reserves in the EU. "Storage facilities are filled with gas to be used later. Currently, there is a stable trend – 0.4% per day (of storage usage, - ed.). The current filling level is about 70%. Considering the weather conditions, particularly the low temperatures, this is quite normal," Ryabtsov told the publication. He believes that the gas reserves in the EU will be sufficient for the remaining two months of potential cold weather.
The maintenance of relatively low gas prices confirms that there have been no negative consequences from halting the transit through Ukraine. There have been no significant fluctuations in the markets recently. Ryabtsov believes this was anticipated.
"Prices may be affected by something unexpected: either an accident or a boycott. The termination of transit was known as far back as July, as there were no applications for reserving pipeline capacities for the following year," noted the expert.
Moreover, in December, when it became absolutely clear that transit would not continue, gas prices in the EU even decreased. "At the end of December, the temperature changed and dropped, the volume of gas extraction increased, and prices returned to the level of early December. Currently, it is around 530 euros per 1,000 cubic meters," Ryabtsov explained.
The EU confirmed that Ukraine's decision to halt gas transit did not impact the energy security of the countries in the region or consumer prices in the market.
"Last week, an extraordinary coordination meeting on gas was held to assess the consequences of the termination of the transit agreement, and it concluded that there are no problems or concerns regarding supply security for the European Union after the end of transit. In terms of prices, the markets have already accounted for this, and we have not seen price spikes in the new year," said European Commission representative Anna-Kaisa Itkonen last week.
Slovakia and Hungary acknowledged they will survive without transit
Slovakia and Hungary, which fought until the last day to maintain transit, have not suffered from the absence of gas. However, they will have to increase their expenditures on gas purchases. Both countries, accustomed to cheap Russian energy resources, do not particularly like this situation. The heads of governments in Bratislava and Budapest seized the opportunity to politicize the issue once again, blaming Ukraine.
Even at the end of last year, Prime Ministers Robert Fico and Viktor Orban repeatedly tried to force Ukraine to continue gas transit. Sometimes they even resorted to threats of cutting off electricity supplies and halting assistance to Ukrainian refugees.
Volodymyr Zelensky even offered Fico to compensate for the rising costs of gas procurement, which amounts to about 500 million euros. However, the offer was declined. As Zelensky later stated, Fico "arrogantly refused". The President of Ukraine viewed the behavior of the Slovak Prime Minister as playing into Moscow's hands.
"The problem is that he has chosen to side with Moscow rather than his own country, not with a united Europe and not with common sense. This was his losing bet from the very start... It was an obvious mistake by Fico to hope that his shadow schemes with Moscow would last indefinitely," Zelensky stated.
By early January, Fico admitted that there would be no problems with gas without transit. In Russia, he was promised that they would find a way to maintain supplies via alternative routes, particularly through the "Turkish Stream." However, on January 13, he requested a meeting with Zelensky in Slovakia near the border with Ukraine to continue negotiations on gas transit. Zelensky quickly responded and agreed to the meeting just a couple of hours later. "Okay. Come to Kyiv on Friday," the President of Ukraine wrote on X.
The Hungarian Foreign Minister Péter Szijjártó stated that the security of energy supplies in the country will be ensured through the diversification of gas supply routes.
Ukraine needs to start gas imports before spring
While there are no perceived risks for the winter in the EU, there are concerns regarding preparations for the next heating season. "Although there is no risk of a gas shortage (in the near term, - ed.), rapid depletion (of storage, - ed.) may complicate the accumulation of reserves before the next heating season and risks affecting short-term prices," Bloomberg reports.
This risk is not only present in the EU. Ukraine entered the heating season with minimal gas reserves. As of mid-October, there were approximately 12.2 billion cubic meters in gas storage. There are no more recent official data available. A year earlier, by mid-October, gas reserves in storage were nearly a third higher – 16 billion cubic meters.
In the current season, gas consumption has increased as thermal generation has switched to gas. Additionally, after the cessation of transit, gas consumption for domestic distribution has risen.
The recovery of gas production is progressing more slowly than it could have. According to estimates by ExPro, growth last year was only 2.2%.
Gas production dynamics in Ukraine (Graphic: ExPro)
Production has increased in state companies, while private ones have reduced output. This has occurred due to the loss of the license for production at the Sakhalin field. Gas has not been produced there for over a year, resulting in a loss of approximately 400 million cubic meters.
During the 2023-2024 heating season, about 6.7 billion cubic meters of gas from storage were used. In the current season, the extraction volume will be higher.
However, according to the latest analysis of the situation, there are no threats of gas shortages in this autumn-winter period, a source in the government told RBC Ukraine. "But to prepare for the next season, active gas imports need to start now," the source said.
According to the former head of the GTSU, Sergey Makogon, given the current gas reserves and without imports, Ukraine will emerge from this winter with nearly empty gas storage facilities. "Thus, in spring-summer 2025, to create a gas reserve at the current year's level, it will be necessary to import 2.8-3.3 billion cubic meters," he believes.