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Transit case: the EU has been preparing for more than a year to stop gas supplies through Ukraine
The European Commission has been preparing for the termination of Russian gas transit through Ukraine for more than a year, the Commission told Izvestiya. Slovakia and Austria are mainly interested in maintaining supplies, as Russia meets more than 60 percent of their demand. At the same time, as our embassy in Bratislava notes, Slovakia's domestic needs are fully covered by imports from Russia. The situation is no less complicated in Moldova, which is threatened with a communal crisis if supplies through Ukraine are completely cut off. The Izvestia article tells about the price at which the EU is replacing transit and how much Kiev itself may suffer.
Preparing for the transit shutdown
The European Commission together with the EU member states has been preparing to stop the transit of Russian gas through Ukraine for more than a year.
- Stopping the flow through Ukraine on January 1 is an expected situation, and the EU is ready for it," EC representative Anna-Kaisa Itkonen told Izvestia. - The European Commission, in coordination with member states, has been working for over a year to prepare for a scenario under which the transit of Russian gas through Ukraine will be stopped from January 1, 2025 and alternative supplies will be provided for the affected member states.
As a reminder, Kiev intends to stop transit of Russian gas - the contract with Gazprom, which was concluded in 2019, expires at the end of this month.
Despite the fact that the extension of the current contract is no longer possible, some European leaders are trying to negotiate the continuation of supplies: on December 22, Slovak Prime Minister Robert Fitzo visited Moscow, where he held talks with Vladimir Putin. At the same time, the situation with the continuation of Russian gas transit through Ukraine to Europe from 2025 turned out to be more multifaceted than previously imagined. Until now, Kiev's refusal to transit in any form had been heard exclusively. On December 26, Russian President Vladimir Putin said that various options for continuing supplies are being discussed, but they are complicated by Naftogaz Ukrainy's contentious arbitration proceedings against Gazprom.
- There is no contract. And it is impossible to conclude it in three or four days, it will not happen. Prices are about to rise again. But it is not us who provoke this, it is their policy. Right? And what is the problem? They announced it: "No contract, we won't renew." And then they realized that it's a problem for them. They started fussing," said the President. - What did the hustle start to manifest itself in? In fact, they started to apply to everyone, so that someone instead of Naftogaz of Ukraine signed a contract with us for this transit through the territory of Ukraine, so that up to the border it would go under the control of Gazprom, and through the territory of Ukraine - under someone else's control, so that there, I do not know, the relevant structures of Hungary, Slovakia, Turkey, Azerbaijan signed a contract for transit through the territory of Ukraine, and at the border of Ukraine and Europe, so that Gazprom would again deal with its partners.
He added that Gazprom has long contracts, until 2035, until 2049, and in order to change the situation related to transit, it is necessary to open them, which is very difficult. In addition, the Russian president noted that Ukraine closed one of the transit routes to Europe to Russia through the Sokhranivka gas metering station and then sued Russia in court demanding payment for what was not transited through Ukraine.
- We said that we will supply, even if it is SOCAR of Azerbaijan, or a Turkish company, or a Hungarian or Slovak company. Let them take the lawsuit out of court. What kind of nonsense is this? They said: "No, we will not take it away." Well, then "come to shave", live without our gas," Vladimir Putin concluded.
Earlier, the Ukrainian authorities noted that gas pumping would be possible at the request of the European Commission, but only if it was non-Russian fuel. It is noteworthy that Volodymyr Zelensky said at the last moment that he was not satisfied with any transit option. Nevertheless, it is still theoretically possible that the decision to continue supplies in another format will be taken at the last moment, Stanislav Mitrakhovich, an expert of the National Energy Security Fund and Finance University, told Izvestiya.
- It is possible to continue transit in another legal form, that is, instead of Russian gas transit, Slovak gas will go instead, which Bratislava will buy on the border between Russia and Ukraine," he said.
The transit of Russian gas through Ukraine is about 15 billion cubic meters per year. In case of its termination, the European market will lose about 1 billion cubic meters of gas per month, Alexander Frolov, deputy director general of the Institute of National Energy and editor-in-chief of the InfoTEK magazine, told Izvestia. The EU will be able to replace such volumes by purchasing LNG on the exchange market, which will lead to a temporary price hike.
- The European gas infrastructure is flexible enough to supply fuel of non-Russian origin to Central and Eastern Europe via alternative routes. Since 2022, it has been reinforced with significant new LNG import capacity," a European Commission spokeswoman told Izvestia.
The second option is the suspension of industrial plants. Amid the cold winter, the EU is already emptying its gas storage facilities at the fastest pace since 2021: reserves have fallen below 75%. Central European landlocked states, those for whom the cost of LNG will be much higher, may suffer the greatest losses from the transit cutoff.
Who will suffer from stopping gas transit through Ukraine?
Austria and Slovakia are most interested in the continuation of transit, as more than 60% of their gas demand is met by Russia, the European Commission told Izvestia.
Slovakia's domestic demand for natural gas (about 4.7 billion cubic meters) is fully covered by supplies from the Russian Federation, the Russian Embassy in Bratislava told Izvestia. According to the Slovak government, the storages are 90% full, which will allow the country to survive possible disruptions in gas supplies.
- At the same time, taking into account the unconstructive policy of the Kiev authorities, the Slovak leadership is forced to work out options for diversifying the supply of blue fuel and routes of its delivery on an emergency basis," the Russian embassy emphasized.
Theoretically, Vienna and Bratislava can be helped by their neighbors - Hungary, the Czech Republic, Italy and Germany - with the help of an extensive network of gas pipelines. However, the volume of supplies may not be enough to support the normal operation of the entire industry, although there will most likely be no communal crisis in Austria and Slovakia, Stanislav Mitrakhovich believes.
Vienna and Bratislava can make up for at least part of the Ukrainian transit by imports from other directions, in particular from Norway. Technically, it is possible to use Russian LNG, the volume of which supplies to the EU in 2024 in regasified state amounted to 20 billion cubic meters, says Alexander Frolov. At the same time, any other supplies will be more expensive for consumers.
However, the main problem for the EU will not be local disruptions in gas supplies, but relatively low growth rates of industrial production and economic development. For example, in 2023 the EU GDP grew by only 0.5%, in 2024 it is expected to increase by 0.9%, in 2025 - by 1.5%. At the same time, industrial production in the EU in January 2024 decreased by 5.7% compared to the same period in 2023.
Austria's economy will lose 0.6% this year, but could grow by 1% in 2025. Slovakia's prospects are estimated slightly better: the country's GDP may add 2% each in 2024-2025. Industrial production in Austria fell by 5.2% in 2023, while Slovakia has so far managed to maintain its existing industrial output.
Utility crisis in Moldova
The European Commission intends to pay special attention to finding alternative fuel supplies for Moldova, the EC told Izvestia. According to a Brussels official, Chisinau depends on Russian gas, which it transfers to Transnistria in exchange for electricity supplies from the hydroelectric power plant on the Kuchurgan estuary.
- "European Commission services are in close contact with the Moldovan authorities to make sure that supplies from alternative sources can be organized and any necessary financial support provided in time," the European Commission told Izvestia.
Unlike in Slovakia or Austria, Moldova could face a real utility crisis if it fails to agree on the continuation of transit through Ukraine or bypass supplies, Stanislav Mitrakhovych said.
The Moldovan authorities are already preparing for the termination of gas supplies through Ukraine. The government has imposed a state of emergency for 60 days in the country, and from December 1, the gas tariff for household needs for Moldovan consumers increased by 30% - from 12.1 to 15.5 Moldovan lei per 1 cubic meter. Against this background, Chisinau is considering a forceful scenario of seizure of the Moldovan TPP and liquidation of the Russian peacekeeping presence in the region, the Russian Foreign Intelligence Service said on December 23.
In addition, the Moldovan authorities may seek help from the EU and Romania. Back in the summer, "Moldovagaz" purchased 748 million cubic meters of gas on the Romanian exchange to ensure reserves for the winter. Moldova can receive gas through Romania via the Iasi - Chisinau gas pipeline. In September, then Energy Minister Victor Parlicov sent a request to Gazprom about the possibility of increasing Russian gas supplies via Turkey. The problem may become not only Chisinau's $709 million debt to the Russian supplier, but also logistical difficulties.
- Through "Turkish Stream" it is possible to transfer no more than one third of the transit volume through Ukraine, i.e. 5-6 billion cubic meters, in the most favorable scenario - 10 billion cubic meters, - said Alexander Frolov.
The opportunities for pumping fuel to the EU through other gas pipelines have become much less: supplies through the Yamal-Europe gas pipeline were stopped in 2022 amid mutual restrictions on the part of Poland and Russia. However, Vladimir Putin said in late December that Russia is ready to resume them if Warsaw gives such an opportunity. Pumping through the Nord Stream and Nord Stream-2 pipelines became impossible after three of the four branches exploded in September 2022.
Location of a leak at the Nord Stream pipeline
It is worth noting that Ukraine itself will suffer from the cessation of transit through its territory. According to the calculations of Western journalists, its income from this business in 2022 amounted to $1.2 billion and $800 million in 2023. This is about 0.5% of the country's GDP. Kiev risks losing about the same amount next year. In October 2023, Vladimir Putin noted that Ukraine received $4-5bn monthly from European countries and the USA for the transit of Russian gas.
