Russian Energy Giant Gazprom to Slow Gas Shipments Through Ukraine

What Happened?

Russian energy giant Gazprom announced it would decrease the flow of gas to Europe through Ukraine at the start of 2025.

The previous five year transit agreement between Russia and Ukraine is set to expire on January 1, 2025 and Russian President Vladimir Putin has said there is no time left for the two countries to sign a new deal before the beginning of the new year.

With no new agreement in sight, buyers of Russian gas are already lining up alternatives to meet their energy needs. Especially in Europe as the weather turns colder with the start of the winter season. 

Why it Matters

Gazprom was once the world’s largest exporter of natural gas. For years posted nothing but steady profits thanks to surging demand in Europe.

However European countries began looking for alternatives to Russian gas after the Russian invasion of Ukraine in 2022 and the results are being felt by Gazprom today.

In 2023 the state-controlled Russian energy behemoth posted a $7 billion loss, which was its first annual loss since 1999. Much of that comes from losses in the European market, as former buyers of Russian gas in the European Union have turned to Qatar, the United States, and even Norway for their annual gas supply. 

European nations long accustomed to cheap Russian gas have also faced economic consequences such as rising energy costs due to their change in gas suppliers.

Increasing energy costs have in turn contributed to rising costs of living and an overall economic slowdown in Europe, which has fueled the rise of populist political parties throughout the European Union. 

Ukraine will also feel the economic effects of letting the current transit deal with Russia expire, as Ukraine is set to lose nearly a billion a year in transit fees from the transport and sale of Russian gas to Europe. The Ukrainian government has made it clear they would rather lose the transit fees than negotiate a new deal with Russia due to the ongoing Russian invasion of their country.

The United States meanwhile stands to benefit economically from increased liquid natural gas exports to Europe. Indeed U.S. natural gas futures have increased 23% this year, and much of that increase is due to rising demand from customers in Europe.

How it Affects You

The economic consequences of the Russian invasion of Ukraine continue to grow not just for the combatants but for Europe and the United States as well.

With the onset of winter in Europe, demand for natural gas is likely to increase which could in turn lead to an increase in exports from suppliers in the United States. The United States already possesses the largest capacity to export liquid natural gas in the world, and that dominance is likely to increase if Europe continues to seek alternatives to Russian energy.