End of era: Stop of Russian gas transit through Ukraine

The USSR began supplying gas to Europe in the second half of the 1960s, initially to Czechoslovakia and Austria. In 1970, the first contract was signed with West Germany. The 1973 oil crisis increased the demand for diversification of oil and gas supply routes to Europe.

The USSR was quite accommodating in all negotiations because the regime was heavily dependent on oil and gas for its survival. This led to the construction of the Urengoy-Pomary-Uzhhorod pipeline in 1981, and the Yamal-Europe pipeline, completed in 1996 (construction began in 1984).

It is worth noting that Europe and the USSR adhered to clear rules of the game, and the energy partnership remained stable even during periods of political tension. By 1985, gas had become a key source of foreign exchange earnings for the USSR.

In 1991, Russia inherited the bulk of the gas infrastructure. Although the 1990s were spent fighting for control of the Ukrainian pipeline, gas remained primarily a financial issue, as everyone needed money

Dominance and collapse

Everything changed in the 2000s. First, the catastrophic chaos in the Middle East following the September 11 attacks. Second, the skill of Putin & Co., that managed to make favorable, corrupt deals with European and Ukrainian businesses, and political elite. Gas became a political tool and a weapon.

In 2001, the construction of Nord Stream 1 began. From 2006 to 2009, Russia actively fought with Ukraine for control of the gas transportation system (GTS), and in the early 2010s, to further "diversify," Russia began planning other routes. By the time of the annexation of Crimea, Europe’s dependence on Russian gas appeared monolithic.

In fact, this dependence has persisted even after 2014. Although the EU has been working to diversify its energy supplies, particularly through LNG (liquefied natural gas), progress has been slow. This would likely have continued if not for 2022. And the point is not just that we were invaded, but that we survived.

The closure of most European contracts with Gazprom and the halt in transit marks the end of Russia’s energy dominance in Europe.

Asia as alternative

Asia will never fully replace Europe as a market. The Asian market will always be less favorable, as it currently serves as a "worse substitute" for Russia. There are several reasons for this:

• Logistics. Most gas pipelines have historically been oriented toward Europe. In general, gas supplies to Europe are much cheaper and faster than to Asia.
• Pricing. The European market offers higher prices for gas, as competition and dependence on environmental standards have made imports from Russia profitable for some countries.
• Russia's limited room for maneuver. Russia has lost its reputation as a reliable supplier due to political manipulation and war. This complicates the prospects for long-term contracts with both Europe and Asia.
• Alternatives in Asia. In Asia, there are more available alternatives and shorter delivery routes. China, the main potential consumer of Russian gas, has wide access to alternative energy sources from countries like Qatar, Turkmenistan, Iran, Southeast Asia, and Africa.

This is long-term political and economic defeat for Putin's Russia. Why?

• Financial losses. The loss of the European market will lead to a reduction in foreign exchange earnings and an increase in the budget deficit.
• Loss of leverage. Russia is deprived of one of its main instruments of influence (mostly corruption) on European politics. Fico and Orbán are not complaining in vain.
• The actual impossibility of returning to the market. Europe is actively seeking alternatives (LNG from the United States, Norway, Algeria), which makes Russia's return to this market unlikely even after the war is over.

Yes, this is yet another example of how an instrument that was created as a long-term guarantee of economic stability - first for the USSR, then for Russia - was squandered by Putin for the sake of his short-term, reckless political and military gambles. Well done. The dumbest ruler in Russian history since Nicholas II.

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About the author. Yurii Bohdanov, publicist, specialist in strategic communications.

The editorial staff does not always share the opinions expressed by the blog authors.