After 50 years, Russia and Ukraine have stopped supplying natural gas to Europe, marking the end of an era

On the first day of 2025, Russia stopped supplying natural gas to Europe through Ukraine, marking the end of an era that lasted half a century in energy history.

On January 1st, Gazprom announced that starting from 05:00 GMT on January 1st, it would cease the transportation of natural gas to Europe through the pipeline built during the Soviet era that runs across Ukraine.

Gazprom stated that the cessation of supply was due to Ukraine's refusal to renew the transit agreement, saying: "Due to Ukraine's repeated explicit refusal to extend the agreement, Gazprom has been deprived of the technical and legal possibility to supply gas through Ukraine."

Ukrainian Energy Minister German Galushchenko stated in a statement, "We have stopped the transit of Russian gas. This is a historic event. Russia is losing its market and will suffer financial losses."

The End of an Era

Although the Russia-Ukraine conflict has lasted nearly three years, natural gas supplies had not been interrupted.

Since 1991, Russia has been supplying natural gas to Europe through Ukraine. In 2018, a record 201 billion cubic meters (BCM) of gas was transported to Europe via the unified pipeline route from Russia.

Russia and the former Soviet Union spent half a century securing a significant share of the European gas market, peaking at around 35%. Russia supplied energy to European countries through multiple routes, including the "Nord Stream" pipeline across the Baltic Sea, pipelines through Belarus and Poland, pipelines within Ukraine, and the "TurkStream" pipeline across the Black Sea.

With the outbreak and escalation of the Russia-Ukraine conflict, the Nord Stream route to Germany was destroyed in 2022, and the Yamal-Europe pipeline through Belarus has also been shut down. The proportion of pipeline natural gas imported from Russia by EU countries has significantly decreased, from 40% in 2021 to about 8% in 2023.

The latest cessation of supply marks the official end of Moscow's dominance in the European energy market for the past 50 years, as well as the era of cheap natural gas that powered the European economy.

Is Europe Ready?

The European Commission stated that the EU is prepared for this.

A spokesperson for the European Commission said, "The European gas infrastructure is flexible enough to provide gas from non-Russian sources. Since 2022, Europe has significantly increased its LNG import capacity."

Since the outbreak of the Russia-Ukraine conflict, the EU has drastically reduced its dependence on Russian energy. According to Bloomberg, in 2021, Russia supplied about 50% of Germany's gas, and that figure has now dropped to zero. The EU is filling the supply gap by purchasing more pipeline gas from Norway and importing liquefied natural gas (LNG) from Qatar and the United States Some European buyers, such as Slovakia and Austria, who were still purchasing Russian natural gas through Ukraine before this supply halt, have arranged for more expensive alternative supplies, while Hungary will continue to receive Russian natural gas through the TurkStream pipeline under the Black Sea.

However, Transdniestria, a pro-Russian breakaway region in Moldova, Ukraine's neighbor, cut off heating and hot water supplies to households earlier on Wednesday. The local energy company Tirasteploenergo urged residents to dress warmly, cover windows and balcony doors with blankets or thick curtains, and use electric heaters.

Bloomberg energy analyst Stephen Stapczynski noted: "Cheap Russian natural gas has been a pillar of some European economies for half a century. That era is now over. Europe will face higher and more persistent gas prices."

(European natural gas price trends)

The German economy has already begun to feel the impact. Stapczynski stated: "Partly due to the loss of Russian energy and other factors, the German economy is 5% smaller than it would have been if it had maintained its pre-pandemic growth trend."

Ukraine will also suffer losses, as the country will lose up to $1 billion in Russian transit fees. To help offset this impact, it will quadruple the natural gas transmission tariffs for domestic consumers starting Wednesday, which could result in annual losses of over 1.6 billion hryvnias (38.2 million USD) for the national industry.

The United States is seen as the biggest beneficiary, with U.S. LNG exports to Europe surging since the Russia-Ukraine conflict. In other words, Europe has shifted from being completely reliant on cheap Russian gas to being entirely dependent on expensive U.S. LNG.