Gazprom prepares for end of gas route through Ukraine after 2024

In Ukraine, Gazprom, the state-controlled gas company of Russia, is preparing for a scenario where natural gas will no longer flow through Ukraine to Europe after December 31, 2024. This decision comes as Kyiv has indicated it does not plan to extend its transit deal, which has been in place for over 50 years, facilitating a vital gas supply network from Siberia to central Europe. This arrangement has been significant for both economic reasons and geopolitical considerations since the Soviet era. As a result, Ukraine earns approximately $1 billion annually from transit fees; however, it has reaffirmed its intention not to renew the agreement. Despite these developments, Russian leadership, specifically President Vladimir Putin, has expressed a willingness to maintain gas transit through Ukraine. Nevertheless, Gazprom's internal assessments indicate a clear expectation of discontinuation of gas exports via this route, which has already seen significant declines. In 2023, gas exports through Ukraine fell to 15 billion cubic meters, a mere 8% of what they were at their peak during 2018-2019. Looking ahead, this anticipated cessation in 2025 is expected to result in a 20% decrease in total Russian gas exports to Europe and Turkey, from over 49 billion cubic meters projected for the current year to just under 39 billion cubic meters next year. The implications of this shift are dire for Russia's energy revenue and its political influence in Europe. As the war in Ukraine lingers and crucial pipelines like Nord Stream remain compromised, Europe's dependence on alternatives, such as U.S. liquefied natural gas, grows. The region's overall gas consumption has already seen a reduction to 295 billion cubic meters in 2023, raising concerns about future energy stability. The situation underscores a significant transformation in European energy dynamics as countries seek to diversify their gas supplies amid ongoing geopolitical tensions. The possibility of reduced Russian gas exports signals a critical juncture for both the energy market and the broader political landscape in Europe.