Russian gas transit via Ukraine faces shutdown amid political standoff

Reuters reports.

Austria's OMV announced that Gazprom would stop natural gas deliveries via Ukraine starting 0500 GMT, Nov. 16, following OMV’s arbitration win. 

Russian gas transit through Ukraine, a route supplying modest volumes to Europe, may fully cease after Jan. 1, 2025, when the current agreement expires, as Ukraine refuses to negotiate during the war. In 2023, only 15 bcm of gas, about 8% of Russia’s peak flows to Europe, used this route. Russia has lost market share to Norway, the U.S., and Qatar since 2022, with EU efforts to reduce dependence on Russian energy.

The Ukrainian pipeline primarily supplies Slovakia, Austria, and Hungary, while other routes like Yamal-Europe and Nord Stream are closed. Limited volumes still move via TurkStream and Blue Stream to Turkey, with some redirected to Europe.

Despite small volumes, the Ukrainian transit earns Ukraine $0.8-$1 billion annually, while Russia gains $3 billion from sales. However, Gazprom faces challenges, including a $7 billion net loss in 2023. Kyiv refuses to extend the transit deal, and alternative routes, such as TurkStream, offer limited capacity. Efforts involving Azerbaijan to mediate negotiations remain uncertain.