Image Source: Getty
Since the 1960s, gas has been supplied from the erstwhile Soviet Union to European countries through a network of pipelines. With the dissolution of the Soviet Union in 1991, the Russian Federation, whose relations with Europe improved considerably, was able to enhance its supply of gas to Europe with new investment pouring in from the West into its energy sector, resulting in the construction of new pipelines. Ukraine’s role in gas transit was pivotal because of its strategic location between Russia and Central Europe, making it a major transit country. However, the energy relations between both countries were seldom smooth, with disputes arising between Ukrainian oil and gas company Naftogaz and Russia’s Gas giant Gazprom over natural gas supplies, pricing, debts, and regional security concerns. These culminated in Gazprom temporarily halting the transit of gas to Ukraine on multiple occasions—in 1994, 2006, 2008, 2009, and 2014, which had transnational impacts on Europe’s energy security.
Ukraine’s role in gas transit was pivotal because of its strategic location between Russia and Central Europe, making it a major transit country.
Despite these concerns, both nations were able to reach a consensus on sustaining transit. For instance, in 2009, a 10-year gas transit agreement was signed, which was renewed for another five years in December 2019. Under the new deal, Gazprom was obliged to pay Ukraine for the transit of 65 billion cubic metres (bcm) of gas in the first year, and 40 bcm of gas in the following years, regardless of the total volume supplied in a given year. For the transit of Russian gas, Ukraine received transit fees amounting to US$800 million annually; however, with the outbreak of the Russia-Ukraine war in 2022 and the subsequent sanctions imposed against Russia, Moscow’s natural gas exports to Europe have declined steeply, falling from 150 billion cubic meters in 2021 to 28.15 bcm in 2023 (see Fig 1.1). Kyiv refused to renew the agreement, citing that revenues from the pipeline would bolster the Kremlin’s war efforts in Ukraine. Europe’s access to Russian gas through the Urengoy-Pomary-Uzhhorod pipeline is now severed. As Europe prepares to diversify its gas imports beyond Russia, the transition will be easier said than done.
Map 1.1: Transit of Russian gas via Ukraine

Source: The Oxford Institute for Energy Studies
Ukraine war and gas transit to Europe
In the immediate aftermath of Russia's invasion of Ukraine, the EU condemned Russia and began cutting back on its imports of Russian energy. In 2022, the total transit of Russian gas dropped dramatically to 65.8 bcm, down from 150 bcm the previous year (see Fig 1.1). Further, along with sanctions imposed on Russia, Germany suspended the certification process of the Nord Stream 2 pipeline, following Russia’s recognition of Donetsk and Lugansk. By May 2022, Ukraine declared force majeure on the transit of Russian gas through Sokhranivka in Lugansk, leaving only one route from the Russian town of Sudzha in the Kursk region (see map 1.1). In the same month, Moscow stopped the flow of gas to Poland through the Yamal-Europe gas pipeline, citing multiple violations committed by Warsaw, including the imposition of sanctions against Moscow. In August, the Nord Stream 1 pipeline was destroyed in an attack. The pipeline carried gas from Vyborg in Russia to Germany under the Baltic Sea (see map 1.2). As a result, Russian gas exports to Europe have been steadily declining.
Map 1.2: Russian Gas pipelines to Europe

Source: CBC News
Fig 1.1: Year-on-year Russian energy exports to Europe
Year |
Total Gas transit volume to Europe (In billion cubic meters) |
Gas transit to Europe via Ukraine (In bcm) |
Gas transit to Europe via the Black Sea (Turkstream) (in bcm) |
Russian LNG exports to Europe (in bcm) |
2020 |
174.9 |
55.8 |
13.51 |
14.9 |
2021 |
150 |
44.13 |
15.98 |
11.9 |
2022 |
63.8 |
22.36 |
12.23 |
19 |
2023 |
28.15 |
16.15 |
11.2 |
17.8 |
2024 |
32.1 |
17.1 |
16.7 |
21.5 |
Source: Author’s compilation of data from Gazprom, ENTSOG, and European Union Agency for the Cooperation of Energy Regulators
Implications of the cessation of the gas deal
Since 1 January 2025, gas prices have risen, a development anticipated as European countries adjust their energy strategies. Key Russian gas buyers in Europe, including Slovakia, Hungary, Austria, and Italy, have been notably affected. Austria and Italy have managed to secure alternative energy sources, with Austria benefiting from multiple pipeline connections and Liquefied Natural Gas (LNG) terminals, while Italy imports gas from Algeria and Azerbaijan. Hungary, meanwhile, increased imports via the Turkstream pipeline, bringing in 5.6 bcm of gas in 2023, and reduced gas imports via Ukraine. Slovakia, which is heavily dependent on Russian gas transit, strongly opposed the cessation of this supply. Slovakian Prime Minister Robert Fico even threatened to cut aid to Ukrainian refugees in retaliation for Ukraine's decision not to renew the gas agreement. In 2023, Slovakia imported 12.6 bcm from Russia, exporting most of it and earning an additional US$200 million in transit fees. Moldova has also been affected, particularly its breakaway region, Transnistria, which now faces a loss of Russian gas for its electricity supply.
As for Ukraine, even before the war began, Ukraine was purchasing gas from traders in the West. In 2019, the Gas Transmission System Operator of Ukraine (GTSOU) launched a natural gas virtual reverse flow from Slovakia, and later with Hungary, Poland, and Moldova. Under this mechanism, Russian gas meant for a specific country, for instance, Slovakia, would not go all the way to Slovakia; rather, the last gas compression station in Ukraine would receive a message (network code) that gas meant for Slovakia should be redirected for Ukrainian use. With transit from Russia ending and no direct access to Russian gas, Ukraine will have to purchase gas from Austria and pay transit fees to Slovakia, which would cost an additional US$51 per 1,000 cubic metres. Despite gas imports being the highest, Ukraine’s domestic capacity of producing natural gas, and a lack of industrial activity caused by the war, Ukraine’s energy security concerns in the short run are being addressed.
The European Union intends to move away from the use of Russian gas by 2027. This drastic reduction in Russian gas imports has resulted in the price of gas increasing in Europe and is having a visible impact on other macroeconomic indicators such as economic growth and inflation. Countries dependent on Russia for their energy security are being impacted more than other European nations. This led to several European countries continuing to be dependent on Russia for the import of piped natural gas or LNG, while progressively increasing natural gas imports from Norway and LNG imports from the United States, Algeria, Qatar, and Azerbaijan. In 2023, Europe’s reliance on Russian gas decreased from 40 percent in 2021 to 15 percent. As natural gas exports via Ukraine decreased, LNG imports from Russia increased by 20 percent in 2024. Thus, the presence of Russian energy in Europe will not disappear overnight.
Moscow will be impacted in the short term by the end of the gas deal, as it will have to find new markets to sell its remaining volumes of gas intended for transit via Ukraine. In 2023, Gazprom posted a US$7 billion loss, and with the gas transit agreement unlikely to be renewed, its revenues could fall by an additional US$4.5 billion to US$6.5 billion annually. Moscow will rely on the Turkstream pipeline to export piped natural gas to Europe. Further, Russia is increasing its gas exports to China via the Power of Siberia 1 pipeline, with plans to build additional pipelines to China via Kazakhstan and Mongolia. However, this is easier said than done, as the EU is a big consumer of natural gas, and offsetting Russian supply volumes is not possible. Gas transit through Ukraine has the potential for an agreement between Gazprom and Ukraine. The European companies would purchase gas at the Russia-Ukraine border, and Ukraine would facilitate its transit. However, at present, the impetus to renew the deal seems lacking. Ukrainian President Volodymyr Zelensky will likely use gas transit through its territory as a bargaining chip during negotiations to bring the conflict to an end.
How does India view these developments?
The increased supply of natural gas creates an opportunity for India to import additional capacities of gas from Russia. In 2016, the government of India announced that it would increase its share of gas from 6.14 percent to 15 percent in 2030, with plans to become a gas-based economy. With imports progressively increasing, discounted LNG from Russia could be a game changer, as it could increase New Delhi’s appetite for the consumption of more gas. Furthermore, even with sanctions imposed on Russian LNG, both nations can work out a mechanism enabling New Delhi to purchase additional volumes of gas from Russia.
Rajoli Siddharth Jayaprakash is a Research Assistant with the Strategic Studies programme at the Observer Research Foundation.
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