Everyone knows one thing — Ukraine is at war and consequently, it wants to hurt Russia every way it can. And yet, when it comes to gas supplies, a key source of revenue for the Kremlin’s war of Ukrainian erasure, that may not be true.
The current deal for the movement of gas from Russia to European countries addicted to cheap Kremlin energy ends on January 1.
Ukraine’s neighbors, all of them EU and NATO members, are now in a panic. Several companies and lobby groups from Austria, Hungary, Slovakia, and Italy fired off a letter to European Commission head Ursula von der Leyen on December 17. Their campaign is broadly supported by their governments.
The declaration was replete with warnings of humanitarian crises, soaring costs of living, and a new energy supply crunch, which would befall Europe if the transit of gas via Ukraine were not renewed on expiry. It seemed that the continent is facing a new energy disaster.
And yet Brussels seemed utterly unmoved: “The Commission does not support any discussions on the contract extension nor other solutions to maintain transit flows and has not been involved in any kind of negotiations on this.”
Add to this Ukraine’s constant denials that it will accept a new deal, and that would seem to be that. The Ukrainian gas transit deal is at an end, reducing even further the continent’s reliance on Russian energy. The message would be plain — the Kremlin’s days of fossil fuel blackmail are nearly over because Europe places greater weight on solidarity and security.
Well, perhaps. While countries like Hungary, Slovakia, and Austria face no problem at all in sourcing alternative energy supplies — they are all plugged into the European network and can use it like everyone else — they choose not to because their governments want to avoid higher costs and (many believe) because they sympathize with the Kremlin. They really don’t want Russian gas to stop flowing.
So how might things pan out? There are already outlines of how this would be managed. Ukraine said on December 17 that it would be willing to allow gas supplies through its east-west network as long as it doesn’t originate in Russia. If this sounds questionable, that’s because it is. Gas can very easily be rebranded and no one would know (because gas molecules don’t come with national flags of origin attached.)
But since Hungary, Slovakia, and Austria generate little sympathy, because of their politics or their wealth, it may happen that impoverished Moldova becomes the poster child of the new campaign.
Moldova may now claim that the difficulties of importing it via a non-Russian route would be insurmountable, at which point the EU would be urged to persuade Ukraine to renew the transit to avoid, Moldova might argue, a midwinter humanitarian crisis.
Once Ukraine agreed to that, Russia’s Central European gas-guzzlers would hope to piggyback on the deal, opening the floodgates to imports of cheap gas (and of course) Russian malign influence.
The scenario, or some variation, is far from implausible.
Moldova, like Ukraine, is a target for Russian territorial expansion. Given this knowledge, it sometimes behaves in a strange way. In November, and after two trips to Russia, the acting CEO of the Moldovan gas incumbent Moldovagaz, drafted a letter, outlining plans to sign the December 17 Central European declaration in support of the transit.
An earlier version of this document, seen by this author, featured the names of several European gas companies and associations, including the Ukrainian gas grid operator, GTSOU, and its CEO, Dmytro Lyppa. Neither Moldovagaz nor GTSOU appeared in the final version.
However, multiple sources close to the discussions and interviewed by the author confirmed both companies were involved in recent talks.
And meanwhile, there are nagging indications that despite vocal rebuttals from Ukrainian officials, Kyiv is ready to seal a deal.
As the existing agreement expires, GTSOU should have been preparing the country’s vast network of pipelines, which can single-handedly cover a third of European gas demand, to operate at a much lower scale. But rather than dismantle the infrastructure, the company has essentially mothballed it. That leaves its options open.
As the year ends, both Kyiv and Brussels will likely face further pressure. There are a few questions they need to consider.
The prevailing argument put forward by promoters is that it would allow access to cheap gas and restore Europe’s competitiveness.
This would be to forget that Europe’s soaring cost of living is directly attributable to the Kremlin. The Russian-provoked 2022 energy crisis also forced the EU to fork out over €800bn in consumer subsidies to mitigate the impact of the supply crunch.
To put this in context, the value of the subsidies to deal with the Russian energy crisis was nearly seven times higher than the total financial support disbursed by the EU to Ukraine since the full-scale invasion.
Most European countries no longer depend on Russian pipeline gas because they understand the risks. The Commission has meanwhile assessed the loss of Ukrainian transited gas would be “negligible.”
Hungary and Slovakia slyly claim that the risk of importing from the West is too high. It is an argument clearly without merit given Europe’s extensive efforts to aid its members and those vulnerable neighbors beyond the EU.
As for Ukraine and Moldova, it is puzzling and troubling that after years of blackmail from the Kremlin, they seem ready to join hands once again with the old abuser.
Ukraine has the opportunity to slam the door on Russia. The decision belongs exclusively to President Zelenskyy and his government who are asked to forgo $800m in transit fees, about 0.5% of GDP, for freedom from Russia’s energy noose.
Will they do the sensible thing? We’ll soon know.
Aura Sabadus is a senior energy journalist writing for Independent Commodity Intelligence Services (ICIS), a London-based global energy and petrochemicals news and market data provider. She is also a Non-resident Senior Fellow with the Democratic Resilience Program at the Center for European Policy Analysis (CEPA).
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
