Russian gas flow to Europe via Ukraine ends, sparking cost fears

The flow of Russian natural gas to Europe via Ukrainian pipelines came to an end today after Moscow and Kyiv were unable to agree on a new transit deal. This development, which unfolded in the early hours of 2025, is expected to impact Central and Eastern European countries, and is sparking fears of rising energy costs for consumers.

The shutdown, while expected, marks a significant shift in Europe's energy dynamics. Negotiations led by Slovakia and Hungary to extend the five-year agreement were unsuccessful, as Ukrainian President Volodymyr Zelensky firmly opposed renewing the deal. This decision is deeply rooted in the ongoing tensions stemming from the Russia-Ukraine conflict that began in 2022.

The European Union has made significant strides in diversifying its energy sources since the onset of the conflict, reducing reliance on Russian gas to just 10% of its overall supply. However, some EU member states remain dependent on Moscow's exports, leaving them vulnerable to disruptions like this.

The pipeline shutdown effectively severs one of the last major routes delivering Russian gas to Europe. Central and Eastern European countries, such as Slovakia, are expected to bear the brunt of this decision. Slovakian Prime Minister Robert Fico expressed concerns about the broader implications, warning of severe impacts on smaller EU nations. Fico criticized what he described as the EU's focus on "selfish national interests" and "geopolitical goals" over the needs of smaller member states.

For Ukraine, this decision carries its own set of economic challenges. Kyiv stands to lose approximately $800 million annually in transit fees previously collected from Russia, while Gazprom, the Russian energy giant, faces a $5 billion reduction in gas sales. The end of this arrangement underscores the diminishing role of Russian gas in European energy markets, which had been dominant for decades.

The immediate concern for Europe is the potential increase in gas and electricity prices. Countries affected by the pipeline halt may now turn to liquefied natural gas (LNG) sourced from Northwestern Europe, which is more expensive. The cost difference is likely to be passed on to consumers, adding to the economic strain on households and businesses.

As Europe braces for this energy shift, the situation highlights the ongoing complexities of regional geopolitics and their far-reaching impact on global energy markets.