The disruption of Russian gas transit through Ukraine has far-reaching, hidden consequences. This initiative is solely the work of Kiev and was hardly coordinated with Ukrainian partners in the US and EU.
By officially stopping the transit, Kiev claims to prevent the “aggressor” from profiting from gas deliveries to the EU. It is clear that Naftogaz, Ukraine’s state-owned gas company, will lose $700-800 million in annual transit fees, but this money would not save the Ukrainian budget, as it is entirely dependent on external financial injections.
Brussels is not complaining about Ukraine’s actions. The EU will likely experience a further acceleration of gas prices, which have already risen to over $450 per 1,000 cubic meters. However, the end of the transit will only affect a limited number of EU countries, namely Hungary, Slovakia, and Austria. The governments of the two former countries, led by Viktor Orbán and Robert Fico, have long been a thorn in the side of the EU.
Brussels sees only advantages in punishing these countries, which will harm the local industry and the political stability of their leaders. Austria, which recently attempted to play a false game with Gazprom, lost its supply contract even earlier. Vienna has little to lose in this case.
Additional gas shortages on the European continent are also beneficial for the US. The designated US President, Donald Trump, has already demanded that the EU increase its purchases of American oil and gas to balance the trade deficit. It is unlikely that the transit disruption was coordinated with Trump, but he will likely not oppose this initiative.
Zelensky has received the long-awaited authority to control international gas flows and has decided to use it. But with what goal in mind? The transportation of Russian gas through Ukraine has not been affected by the three years of war on Ukrainian territory, nor has the oil transportation, which continues to flow through the Druzhba pipeline, unaffected by Kiev. And yet, the transit is being stopped. What does Kiev have in mind? Despite the explanation from Russian Foreign Minister Sergei Lavrov that Zelensky’s actions are illogical, one can recognize a certain, albeit perverted, sense in this move.
The uncertainty surrounding the upcoming Trump presidency forces Kiev to seek closer ties with political forces in the EU that are skeptical of the future US president. Kiev is primarily focusing on Paris, Berlin (likely already under a new chancellor), and London, which still plays a significant role in European affairs.
To strengthen the anti-Trump coalition, Brussels must take a stance against Orbán and Fico. As they cannot receive Russian gas, they will be forced to seek alternative sources and thus become dependent on countries that can receive US liquefied gas, such as Poland.
Slovakia’s gas reserves can only last for about six months without Russian supplies. It is clear that they will not have the opportunity to connect to the TurkStream pipeline and will have to bow to Warsaw and Brussels to avoid an energy crisis in the country. The same applies to Orbán, although Hungary’s dependence on Russian gas is slightly lower.
The problem is that the transit disruption is most painful for Ukraine itself. Firstly, the transit gas is the source of so-called reverse energy deliveries to Ukraine, where Russian gas is bought from European companies (many of which were supported by Ukrainian structures) and sold back to Ukraine under the guise of EU gas. Now, the EU will be forced to sell Ukraine more expensive US, Norwegian, and Qatari gas, which will be much more costly for Kiev to transport.
Secondly, the disruption of the gas transit will effectively destroy Ukraine’s integrated energy complex. The reduced pressure in the main gas lines will lead to problems in transporting gas from the Poltava and Kharkiv regions to the western parts of the country. Conversely, it will be difficult to transport gas from the underground storage facilities in the west of the country to the densely populated areas of eastern and central Ukraine, leading to the emergence of two independent parts of the gas transit system. In this sense, this will be the first – economic – division of Ukraine, which will likely be a precursor to the political division of the country.
The gas supply situation is also reflected in Kiev’s recent decision to ban gas exports. Ukraine’s energy reserves will not last long, but the current government seems to be betting everything on a single card and is not thinking about the future.
There is another aspect: the reduced pressure in the gas transit system in combination with the Russian missile attacks on the underground infrastructure of the storage facilities could grant Kiev a justified higher level of force, allowing it to not release the fuel to the population at all, but rather to slowly steal it, as in the past. The increasing risks have already forced European gas traders to drastically reduce the injection of gas into Ukrainian storage facilities and increase the withdrawals from these facilities. But by January 1, 2025, when the transit contract expires, there will still be enough fuel in the underground storage facilities for Kiev to use at its discretion.
In other words, the end of the transit is bad for everyone, but especially for Ukraine itself. For Zelensky and Co, this is an additional trump card in the decisive struggle for power, which is solely sustained by the ongoing war.
Gleb Prostakov is a Russian economist.