While we won't have $800 million, Gazprom won't receive billions — an energy expert regarding the cessation of Russian gas transit

In 2024, the five-year agreement governing the transit of Russian gas through Ukraine, which has contributed over $10 billion to the enemy’s budget in the past two years, is set to expire. Ukraine’s Energy Minister, Herman Galushchenko, has declared that this contract with Russian Gazprom will not be renewed. Why wasn’t the transit of Russian gas halted earlier, and how might this decision impact the economies of both Ukraine and Russia?

Oleksiy Ryabchyn, an energy and climate expert and former advisor to the Chairman of the Board of Naftogaz of Ukraine, as well as Deputy Minister of Energy and Environmental Protection from 2019 to 2020, addressed these questions on Hromadske Radio.

«I remember the challenging discussions at Naftogaz during the onset of the full-scale invasion. Both management and employees questioned why we were continuing to sell Russian gas during the war. However, our European partners, who have been supporting us, insisted that we honor our contractual obligations and provide them with the opportunity to prepare for the termination of this transit contract, allowing them to seek alternative sources of gas. In essence, they have succeeded. Europe’s dependence on Russian gas has decreased to around 15%, down from much higher levels previously. Thus, this is not a critical issue now, as LNG capacities have been expanded, and other supply contracts have been secured», — Ryabchyn recounted

Ryabchyn believes that ceasing the transit of Russian gas will not critically impact Ukraine but will inflict greater harm on the enemy. Although the Russian economy may not suffer significantly, Gazprom would face a substantial loss.

«Ukraine will fare well. We are on the path to becoming a prosperous European nation with renewable energy sources and a robust economy. I anticipate no major hurdles in halting the transit of Russian gas. We can transition to domestically produced gas. This will necessitate specific managerial, operational, and technical adjustments, and our system will operate differently. True, we will lose approximately $800 million in revenue from Russian gas, but conversely, Gazprom will miss out on billions».

Nonetheless, such a shift could lead to higher gas prices in Ukraine.

«Indeed, gas price concerns may arise. We may benefit from altered gas pressures, allowing compressor stations to consume less gas for their operation. Supplying Ukrainian gas to the system will become easier and cheaper without the high pressures resulting from Russian transit. However, there are also negative aspects that could contribute to price increases», — Ryabchyn acknowledged