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On January 1, 2025, a major shift in Europe’s energy landscape occurred when Russia stopped its gas exports through pipelines running across Ukraine. This event ended decades of Moscow’s dominance over the European energy market and marked the culmination of years of geopolitical conflict. The move comes after Ukraine declined to extend a transit agreement, a decision that has far-reaching implications for both Russian energy exports and Ukraine’s economic outlook.
The Halt: Why It Happened and Its Impact on Europe
For nearly three years, despite the ongoing war in Ukraine, Russian gas continued to flow to Europe through these vital pipelines. The Russian energy giant Gazprom confirmed the stoppage of gas flow at 5:00 GMT on New Year’s Day. According to Gazprom, Ukraine’s refusal to renew the transit deal led to this momentous decision. This pipeline, a relic of the Soviet era, had been a crucial link in supplying Russian gas to European nations, particularly in the eastern and central parts of the continent.
However, the impact of this stoppage on Europe is relatively contained, at least in the short term. Unlike 2022, when disruptions in gas supplies from Russia led to record-high prices and exacerbated the cost-of-living crisis across the European Union, the situation in 2025 is different. The EU has prepared well for this day. Over the past few years, Europe has diversified its energy sources and significantly reduced its dependence on Russian gas. As a result, the halting of gas through Ukraine will not lead to a price surge or create an energy shortage in Europe.
How Europe Adapted to the Loss of Russian Gas
The European Commission emphasized that the continent’s energy infrastructure has been fortified to withstand disruptions such as this one. New liquefied natural gas (LNG) import terminals, along with greater gas supplies from countries like Norway and the United States, have played a pivotal role in insulating the EU from Russian energy manipulation. The commission reassured the public that Europe’s gas network remains flexible, able to accommodate supplies from non-Russian sources.
Countries that were still importing Russian gas via Ukraine, including Slovakia and Austria, had already secured alternative routes. Slovakia has turned to Germany and Hungary to fulfill its energy needs, though this will result in slightly higher transit costs. Austria, which had continued to receive small amounts of Russian gas, has also ensured alternative supplies. Hungary remains the only major EU country still receiving Russian gas, though via the TurkStream pipeline, which runs under the Black Sea.
The European Union’s success in diversifying its gas imports is a direct result of the energy crisis triggered by Russia’s invasion of Ukraine in 2022. The EU’s ability to pivot away from Russian energy supplies has been an essential step in its strategic shift to ensure energy security for the bloc’s members.
Ukraine Faces Economic Consequences from the End of Gas Transit
For Ukraine, however, the end of gas transit through its pipelines represents a significant loss of revenue. The Ukrainian government had been earning substantial transit fees for allowing Russian gas to flow through its territory. With the stoppage, Ukraine stands to lose up to $1 billion annually in these fees, a blow to its war-torn economy.
To offset the financial loss, Ukraine has decided to increase domestic gas transmission tariffs for consumers. The new tariffs, which came into effect on January 1, 2025, will likely lead to higher energy costs for Ukrainian households and industries. The government has warned that the price hikes could burden the Ukrainian economy, particularly the industrial sector, which may face an additional cost of over 1.6 billion hryvnias (approximately $38.2 million) per year due to higher tariffs.
Despite this economic setback, Ukrainian officials, including Energy Minister German Galushchenko, have highlighted the historic nature of this transition. Galushchenko emphasized that Europe had already made the decision to reduce its reliance on Russian energy, signaling that the end of gas transit through Ukraine is part of a broader shift in the global energy market.
The Impact on Moldova and Transdniestria
One region that has been significantly affected by the cessation of Russian gas supplies is Transdniestria, a breakaway pro-Russian region in Moldova. Transdniestria, which is heavily reliant on Russian gas that passes through Ukraine, faced immediate consequences, including disruptions in heating and hot water supplies to households. Local authorities, including the energy company Tirasteploenergo, urged residents to prepare for colder conditions by wearing additional layers, covering windows with blankets, and using electric heaters to cope with the energy shortage.
Gazprom and Russia’s Economic Losses
For Gazprom, the decision to halt gas exports through Ukraine will have significant financial consequences. The company is expected to lose close to $5 billion annually in gas sales, marking a major shift in Russia’s energy strategy. The company had already halted gas exports to Austria in mid-November 2024 due to a contractual dispute, and the latest disruption further underscores the challenges faced by Russia in maintaining its once-dominant role in the European energy market.
In 2023, Russia only managed to export about 15 billion cubic meters (bcm) of gas to Europe via Ukraine, a stark contrast to the 65 bcm it delivered during the last five-year contract in 2020. The decline in gas exports highlights the ongoing decoupling of Russia from European energy markets, a trend that is expected to continue.
