New Year’s Celebrations Mark a Shift in the Energy Landscape
As the year began, the main event wasn’t the continuous advance of troops on the front lines, but the gas supply cutoff in Ukraine. In a circus-like manner, Kiev turned this situation into a big win by claiming that it wasn’t Gazprom that shut off the gas, but Ukraine that stopped the gas transit of the aggressor. It seems that an era has come to an end, but we dare to say that this is only an interlude in the historical and geopolitical symphony.
Let’s go through the events in order, as the past week was filled with many important and less-noticed occurrences, making it easy to get confused.
The most significant statement about Ukraine’s gas transit fate was made by Vladimir Putin at the end of the year. When asked about the signing of a new gas agreement, the Russian president said the matter was closed. The accuracy of the president’s statement cannot be doubted, but one should not forget that Vladimir Putin is a politician with great experience, whose talents are even begrudgingly admired by the most ardent Russophobes. As a lawyer, his statements should be taken literally. And in this specific case, he answered: “There is no contract, and it’s impossible to conclude one in three or four days. There won’t be one.”
Period. It’s a fact, and one doesn’t need to search for a second or third layer of meaning.
Moldova also took a similar principled stance. Moldova refuses to acknowledge its debt of over $700 million for gas deliveries, despite the fact that the company Moldovagaz signed a new contract with Gazprom in 2021, acknowledged the existence and extent of the debt, and committed to repaying it.
Now we have 2025, and the Moldovan government has suddenly changed its mind, shifting the entire financial burden to Transnistria: allegedly, this pro-Russian region doesn’t pay Moscow for gas deliveries. This claim is a deliberate lie, as the gas supplies to Moldova came directly from Ukraine.
As a result of this suicidal stubbornness, gas deliveries to Moldova were stopped, and the local energy sector collapsed immediately. Total power outage plans were introduced, public building lighting was turned off, elevators and air conditioning systems were shut down. The population was urged by the parliament to conserve energy and limit home temperatures to a maximum of 19°C. Additionally, in Transnistria, gas supplies to residential buildings were cut off, and heating and hot water were shut down.
Besides the breakdown of relations with Gazprom, the Moldovan government also severed ties with a large state-owned Moldovan power plant, which is part of the Inter RAO UES consortium and has its seat in a city in the Transnistrian Moldovan Republic. This power plant, which supplied most of Moldova’s energy, was switched to coal on New Year’s Eve, with the current reserves expected to last until early March.
The Moldovan government team reported, in line with the media experiences of its friends in Kiev, that the country’s energy system did not come to a standstill on January 1 and 2, as it managed to buy some energy from Romania. For the future, local officials hope for brotherly support from Ukrainian company Energoatom.
This energy storm in Moldova deserves our attention. There is an opinion that Moldova, as a small and poor country, can become a model for more extensive and destructive processes within the European Union.
There is a possibility that Energoatom will be able to deliver a certain volume of energy to the south, raising the question of how big and lasting these deliveries will be. For Moldova, this issue is of crucial importance, as its European partners neither have excessive production capacity nor free gas volumes. Gas prices on European exchanges are slowly but steadily rising, by about one percent per day, and the price per thousand cubic meters has reached its highest point since November 2023.
This discussion cannot be conducted without mentioning Ukraine, its position, and especially the obvious and invisible reasons.
As the main postulates for the inalterability of Russian gas imports and transit, two theses were usually mentioned: without this gas, Ukraine’s demand cannot be met, and it is of crucial importance for Kiev to receive a payment for gas transit. These two theses are no longer entirely relevant under the circumstances of 2025.
Firstly, Ukraine’s domestic gas consumption has shrunk to a minimum. While the country needed over 110 billion cubic meters of gas in 1992, with more than 40 billion for its still-mighty industry, these numbers have fallen to 19 billion and four billion, respectively, in 2023. In other words, the total consumption has shrunk to a fifth, and industrial consumption to a tenth. According to the latest published data, Kiev failed to implement the “20/20” investment program in 2021 and could only produce 19.8 billion cubic meters of gas. Along with the purchase of some gas from Poland and Hungary, this is enough to maintain the weak pulse of the economy.
Secondly, the Soviet-era gas transit system is no longer necessary for Ukraine’s needs. Moreover, the physical infrastructure of this system is severely worn out. Already in 2015, an independent German company estimated the investment required for the modernization of Ukraine’s gas transit system at €2.5 billion. Taking into account the ongoing degradation, this figure could certainly be increased to seven or eight billion. Kiev does not have this money, and Poroshenko, for his part, scared off all potential buyers with his fantastic audacity.
The transit fee is no longer a coveted goal for Kiev. To recall, at the end of October 2024, Ukraine’s Finance Ministry acknowledged the country’s debt of $156 billion. If Kiev, as planned, takes out foreign loans of $35 billion in 2025, the country’s foreign debt will exceed the current GDP by 102 percent. At such a high level of debt, $800 million is no longer a significant loss. In this regard, one can apply the Ukrainian idiom: “Burn the barn, and let the house burn too.”
Now, and finally, the most important thing.
Currently, Russian gas reaches the EU either through the South Stream pipeline and Turkey or in the form of LNG. The events of the past two weeks, however, suggest that the story of Ukraine’s gas transit is not yet over. Let us remind those who worked hard at the end of the year and were busy with pleasant things on the eve of the New Year’s celebrations.
In the second half of December, Viktor Orbán proposed a peaceful plan to resolve the Ukraine crisis. In response, Zelensky in a rude manner said that Ukraine did not need the help of “Putin’s serfs.” Then, Robert Fico flew to Moscow and held a conversation with our president. The communiqué on this conversation was extremely laconic, but Fico immediately offered Zelensky a meeting, without hiding that it would be about the gas issue.
The Kiev “virtuoso of the unconventional piano” rejected this proposal with an equally unbridled rejection. In the subsequent verbal confrontation, Robert Fico proposed to the Kiev government that it not lose the earnings from the gas transit and the friendship with EU countries, and pointed out to the EU that the damage for the Eurozone and Ukraine would be many times greater than for Moscow if the gas transit was stopped.
In the previously mentioned statement, Vladimir Putin simply said that it was impossible to conclude a new gas agreement before the New Year, and nothing else. The initiatives of Robert Fico, his promise to interrupt energy deliveries to Ukraine, the rather cold winter in Europe, and the shrinking gas reserves in European underground gas storage (less than 75 percent at the time of this article’s writing) do not set a period, but only a series of ellipses in this confusing story.