On Sunday, Russian President Vladimir Putin met with Slovak Prime Minister Robert Fico at the Kremlin, marking a rare visit by a European Union leader to Moscow as a contract allowing Russian gas to pass through Ukraine expires. Ukrainian President Volodymyr Zelenskiy stated on Thursday that Kyiv would consider continuing the transit of Russian gas, but only if Moscow did not get payment until after the war, something Moscow was unlikely to agree, according to Reuters.

In 2023, Russia shipped approximately 15 billion cubic meters (bcm) of gas through Ukraine, accounting for only 8% of peak Russian gas flows to Europe via various routes. If Russian gas transit via Ukraine is completely shut down, who will be the most affected?

UKRIAN ROUTE The Soviet-era Urengoy-Pomary-Uzhgorod pipeline transports gas from Siberia through the town of Sudzha, which is now controlled by Ukrainian military forces in Russia’s Kursk area. It then flows via Ukraine into Slovakia. In Slovakia, the gas pipeline is divided into branches that lead to the Czech Republic and Austria. Despite a contractual dispute between Gazprom and Austria’s OMV in mid-November, Russia’s gas exports through this route remained stable. Other purchasers stepped in to purchase the amounts.

Austria still obtains the majority of its gas from Ukraine, while Russia accounts for almost two-thirds of Hungary’s gas imports. Slovakia receives approximately 3 billion cubic meters per year from energy giant Gazprom, which meets roughly two-thirds of its needs. Last year, the Czech Republic nearly eliminated its gas imports from the east, but will resume imports from Russia in 2024. Most other Russian gas routes to Europe have been closed, including Yamal-Europe via Belarus and Nord Stream under the Baltic. The only other active Russian gas pipeline route to Europe is the Blue Stream and TurkStream to Turkey beneath the Black Sea. Turkey exports certain Russian gas amounts to Europe, particularly Hungary.

WHY IS THE UKRAINIAN ROUTE STILL WORKING? While the remaining Russian gas transit quantities are minimal, the problem remains a quandary for the EU. Many EU nations, like France and Germany, have stated that they will no longer buy Russian gas, while Slovakia, Hungary, and Austria, which have stronger links to Moscow, oppose the EU’s united strategy. The countries that still get Russian gas believe that it is the most cost-effective fuel and blame surrounding EU countries for the hefty transit fees imposed on alternative sources. Ukraine continues to earn between $0.8 and $1 billion per year in transit fees from Russian gas transit. According to Reuters calculations, Gazprom’s total pipeline gas shipments to Europe across all routes in 2024 will climb to 32 bcm from 28.3 bcm.

According to Reuters calculations, Russia may earn almost $5 billion in sales through Ukraine this year based on an average Russian official gas price projection of $339 per 1,000 cubic meters. Gazprom, Russia’s gas pipeline export monopoly, will incur a net loss of $7 billion in 2023, its first annual deficit since 1999, when EU gas markets disappear. Russia has maintained it is willing to prolong the transit , but Kyiv has repeatedly stated that it will not do so. Another alternative is for Gazprom to supply some of the gas through another route, such as TurkStream, Bulgaria, Serbia, or Hungary. However, the capacity of these routes is restricted. Hungary wants to maintain the Ukrainian route open,

Another option is for Gazprom to supply some of the gas via another route, for example via TurkStream, Bulgaria, Serbia or Hungary. However, capacity via these routes is limited.Hungaryhas been keen to keep the Ukrainian route open, but said it would continue to receive Russian gas from the south, via the TurkStream pipeline on the bed of the Black Sea.The EU and Ukraine have also asked Azerbaijan to facilitate discussions with Russia regarding the gas transit deal.A senior source at Azeri energy company SOCAR told Reuters on Friday that Moscow and Kyiv have failed to agree on the deal brokered by Azerbaijan to continue Russian gas exports to Europe via Ukraine.