On January 1st, 2025, Ukraine officially stopped the transit of Russian gas through its territory after the expiration of a five-year deal between Gazprom and Naftogaz. This decision, long anticipated, represents a major turning point in the historic gas relationship between Russia and Europe.

For decades, Ukraine's transit route was vital for Russian gas deliveries to Europe, but disputes in 2006 and 2009 revealed Europe’s reliance. Since Russia’s 2022 invasion of Ukraine, the EU has sharply reduced its dependence on Russian gas, investing in LNG facilities and alternative pipelines from suppliers like Azerbaijan.

The EU's limited reliance has softened the immediate shock, but countries like Moldova and Ukraine face are experiencing substantial losses, while Russia faces long-term financial and geopolitical consequences.

Key points

• Moldova's energy crisis: Moldova, especially the pro-Russian Transnistria region, has been severely affected. Once fully reliant on Russian gas via Ukraine, the halt has cut off supply, leading to energy rationing, industrial shutdowns, and blackouts.
• Financial losses for Ukraine: Ukraine is losing $450 million annually in gas transit fees, with disputes over unpaid fees unresolved due to the ongoing conflict. It also risks losing the competitive advantage of its large underground gas storage facilities.
• Limited impact for EU but call for more cooperation: The EU losses are limited due to reduced dependency, but Member States like Austria, Hungary and Slovakia, still reliant on Russian gas, - will be more affected. Stronger EU cooperation and financial support to Moldova and Ukraine are essential to handle the shock.
• Russia's weakened geopolitical influence: Russia faces losing about $6.5 billion annually from reduced gas exports. More critically, the halt limits its ability to use gas as a leverage, leaving its pipeline access to Europe dependent on Turkey.

Meet the author

• Chloé Le Coq: University of Paris Panthéon-Assas (CRED); Stockholm Institute of Transition Economics (SITE); DIW Berlin.

This policy brief was published by the Stockholm Institute of Transition Economics (SITE) and the FREE Network in January 2025.

Photo: CHUYKO SERGEY, Shutterstock