Editor’s note: Iqor Yushkov is a leading analyst of the National Energy Security Fund and an expert of the Financial University under the Government of the Russian Federation. The article expresses the personal opinion of the author and may not coincide with the opinion of News.Az.
As for the transit of Russian gas through the Sudzha gas metering station, this is now the only remaining active route for gas transit through Ukraine. Until 2022, there were two routes: one of them, which went further south, passed through the Sokhranovka gas metering station. But in 2022, Ukraine stopped using it, declaring that it no longer controls part of the pipeline, as it now passes through the territory of the Luhansk People’s Republic (LPR), and it closed this section of the pipeline.
In response, Ukraine asked Gazprom to redirect the gas volumes flowing through Sokhranovka to the northern route via the Sudzha station, where it believed there was sufficient capacity to handle larger gas volumes. However, Gazprom refused, arguing that it could pump a maximum of 42.4 million cubic meters of gas per day through Sudzha. As a result, the volume of gas flowing through Ukraine fell from about 109 million cubic meters to 42.4 million cubic meters per day.
This route is now the last one that still supplies Central Europe and parts of Western Europe with gas via Ukraine. Slovakia, Austria, Hungary and Moldova currently get their gas via this route. The other route, TurkStream, supplies gas mainly to Turkey and Balkan countries such as Bulgaria, Serbia, North Macedonia, Greece and Romania, and partly to Hungary. Hungary gets most of its gas via TurkStream.
If gas transit through Ukraine were to stop entirely, Hungary would likely be able to meet all its needs through TurkStream. However, Austria and Slovakia would be hit hard as they would not be able to obtain gas through TurkStream. Slovakia would not only lose its gas supply but also the transit fees it charges for sending gas to Austria. These countries would then have to look for alternative gas sources on the global LNG markets, which would entail additional costs for transportation, regasification and transport.
If gas transit through Ukraine were to be terminated, Moldova would likely have to rely on gas from TurkStream. Even though Moldova does not consume that much gas, some of the surplus gas that Gazprom currently sells to traders via TurkStream could be diverted to meet Moldova’s needs.
The biggest losers in this scenario would be Slovakia and Austria, as competition for available gas would increase and push up prices across the market. We are already seeing how the threat of disruption to transit through Ukraine has pushed up gas prices by over $100 per thousand cubic meters.
If transit were to actually be suspended, especially after the contract ends on January 1, 2025, the impact could be even worse, as it would happen in the middle of the heating season when gas demand is at its highest. Prices could then rise to $600-700 per thousand cubic meters, causing significant problems across Europe.
Ukraine would also be affected, as it collects transit fees and uses part of the transit gas for its own needs. If transit were to be stopped, Ukraine would have to redirect gas flows, which could be a major challenge, especially in winter. This would lead to higher tariffs and additional costs.
A transit stop would also be a serious setback for Gazprom, as the company would not be able to cover these volumes via other routes. Production would probably have to be cut by 15 billion cubic meters, which would damage the company’s finances and the Russian state budget.
In this situation, everyone would lose except the LNG producers. The USA, with its large international companies that export LNG, would benefit from higher gas prices and a larger share of the world market, which also suits its political goals of pushing Russian gas out of the European market.
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