Putin cuts Russian gas to his allies Hungary and Slovakia
Natural gas flows from Russia to eastern Europe via Ukraine stopped on Wednesday. as a transit deal came to an abrupt end and sent prices soaring.
Russia’s energy firm Gazprom and the Ukrainian government both said that transit of Russian gas through Ukraine, which had continued despite the war between the two countries, had finally stopped on New Year’s Day.
According to data published by Ukraine’s gas transit network operator, initial orders for gas at Sudzha, an intake station on the Russia-Ukraine border, were set for zero from January 1. On Tuesday European natural gas prices hit €50 for the first time in more than a year after the news.
Ukraine now faces the loss of some $800 million a year in transit fees from Russia, while Gazprom will lose close to $5 billion in gas sales.
The European Commission played down the impact and said that the stop had been expected and the bloc was prepared for it.
“The European gas infrastructure is flexible enough to provide gas of non-Russian origin to CEE (central and eastern Europe) via alternative routes,” a spokesman for the European Commission said. “It has been reinforced with significant new LNG import capacities since 2022.”
While most European states have found alternative supplies since the Kremlin’s invasion of Ukraine in February 2022, Hungary and a handful of its neighbours remain dependent on the “Brotherhood” network of pipelines from Russia.
Their governments are now confronted with a rise in energy bills, the loss of their own secondary transit revenues and the prospect of mounting public disgruntlement as one of their primary sources of natural gas vanished overnight.
This is particularly uncomfortable for Viktor Orban, Hungary’s authoritarian prime minister, and Robert Fico, his Slovakian counterpart, both of whom have consistently aligned themselves with Moscow.
Yet it is also potentially awkward for the centrist leadership of the Czech Republic, which had declared “independence” from Russian gas last year but has since significantly increased its imports.
The five-year gas transit agreement between Kyiv and Moscow which has now expired had previously regulated about half of Russia’s remaining exports to the EU and provided Austria, Hungary and Slovakia with roughly two thirds of their supplies.
The effect will not be an immediate catastrophe: all of the countries in question already have enough gas in storage to see them through the rest of the winter, barring an unexpectedly severe cold snap.
Over the coming months, however, they will have to lean more heavily on other, more expensive sources, such as liquefied natural gas imports via Italy, Poland, Croatia and Germany, or pipeline gas routed through the Balkans or Azerbaijan. Ukraine has also offered to provide some of its own domestic production.
That shift could in turn drive up prices around the broader neighbourhood, particularly in Italy, meaning that the consequences could be felt across Europe’s gas markets.
On Tuesday wholesale gas prices for the UK and the Netherlands-based TTF exchange, the European benchmark, edged upwards in anticipation of the end of the transit deal and forecasts of colder weather in early January.
In recent weeks both Orban and Fico had made increasingly desperate attempts to keep the arrangement alive.
Orban, who has tried to turn Hungary into a regional trading hub for Russian hydrocarbons, suggested in vain that the pipeline gas flowing through Ukraine could be rebranded as “Hungarian”.
Fico went further, flying to Moscow and threatening Ukraine with “reciprocal measures” if it refused to renew the transit contract.
“If it is unavoidable, we will stop the supply of electricity, which Ukraine urgently needs in the event of grid failures,” he said in a public video message on Friday.
Another country in the crosshairs of the energy conflict is Moldova, which recently re-elected its pro-western president in the face of colossal interference from Russia and its proxies.
Gazprom, the Russian state’s main gas export conglomerate, said it would stop supplying Moldova on Wednesday, ostensibly because of a legal dispute over allegedly unpaid bills.
Although most of Moldova has pivoted to gas imports from neighbouring European Union members, this would chiefly affect the breakaway Transnistria region, which Moscow treats as part of its sphere of influence.
