From the beginning of 2025, gas prices in Europe reached their highest level since October 2023. This was due to the halt in the transit of Russian gas through Ukraine, against the backdrop of colder weather and technical problems at a Norwegian natural gas liquefaction plant.
Main factors of price increase
1. Halt in transit through Ukraine: Russia stopped gas supply through Ukrainian territory after the expiry of a five-year contract. This closed a route that had been in operation since the dissolution of the USSR.
2. Technical issues in Norway: The shutdown of a natural gas liquefaction plant due to a compressor breakdown also affected the overall European market.
3. Dependence on other suppliers: While Europe has significant gas reserves, any disruptions in supply from global LNG markets complicate replenishing reserves for the next heating season.
Economic losses for Russia
The halt in transit through Ukraine not only changed the energy map of Europe but also caused significant losses for Russia:
– Revenue losses: Russia’s annual income will decrease by around €5 billion, previously received from gas transit.
– Export decline: Since 2020, the volume of Russian gas supplied to Europe through Ukraine has decreased by 78%.
– Financial losses for Gazprom: In 2023, the company incurred a net loss of 629 billion rubles. It was the first similar case since 2001.
Impact on Europe and Ukraine
The European Union is gradually reducing its reliance on Russian gas by increasing imports from alternative suppliers. However, the loss of 14 billion cubic meters of gas that previously flowed through Ukraine poses certain risks to energy supply stability.
For Ukraine, the completion of the contract means losing approximately $800 million in annual revenue from transit, even though the country has not imported gas from Russia for many years for its own needs.
New Realities of the European Gas Market
Europe is entering a new era of energy independence, but at the same time faces challenges related to finding new sources of energy and maintaining price stability. Russia, on the other hand, continues to lose positions in the global energy market, which could further impact its economy.
The next few months will be crucial for both sides in the context of adapting to the new conditions.
