Europe is most at risk due to Ukraine's halt of Russian gas flows.

• On New Year's Day, Ukraine stopped the supply of Russian gas to multiple European countries, marking the end of Moscow's long-standing control over Europe's energy market.
• The anticipated move signifies the conclusion of a five-year transit agreement between Russia and Ukraine, as neither party is willing to negotiate a new agreement amid the ongoing conflict.
• Austria is ready for the halt, but Slovakia's Prime Minister Robert Fico has warned to disconnect electricity to neighboring Ukraine.

On New Year's Day, Ukraine stopped the supply of Russian gas to multiple European countries, marking the end of Moscow's long-standing control over Europe's energy market.

On Wednesday, around 5 a.m. London time, Gazprom, Russia's state-owned energy company, confirmed that gas exports to Europe through Ukraine had stopped at approximately 8 a.m. local time.

The end of a five-year transit agreement between Russia and Ukraine is widely expected, as neither side is willing to negotiate a new deal amid the ongoing conflict.

Last month, Ukrainian President Volodymyr Zelenskyy stated that Kyiv was not ready to prolong the transit of Russian gas, emphasizing: "We will not allow any more billions to be earned on our blood."

Since 1991, Russia has been transporting gas to Europe through Ukrainian pipelines. Now, Russia claims that European Union countries will be most affected by the supply shift. Although Moscow can still send gas via the TurkStream pipeline, which connects Russia with Hungary, Serbia, and Turkey.

Due to the stoppage, Ukraine may lose up to $1 billion annually in transit fees from Russia, while Gazprom could potentially lose nearly $5 billion in gas sales, according to Reuters.

The EU's executive arm, the European Commission, has been collaborating with the member states most affected by the conclusion of the gas transit agreement to ensure that the entire 27-nation bloc is prepared for this situation.

In 2023, Slovakia, Austria, and Moldova were the countries most vulnerable to the halt in Russian gas transit volumes, with Slovakia importing 3.2 billion cubic meters, Austria receiving 5.7 billion cubic meters, and Moldova getting 2 billion cubic meters.

While Austria expressed confidence in its readiness for the halt, others expressed greater concern.

Robert Fico, Slovakia's Prime Minister, cautioned that Ukraine's cancellation of the gas transit agreement would cause a "severe" effect on the EU, without affecting Russia negatively.

The prime minister, a vocal critic of the EU's support for Ukraine in the ongoing war, visited Moscow for talks with Russian President Vladimir Putin shortly before Christmas.

Last month, Moldova, which is not part of the EU, declared a 60-day state of emergency due to concerns about energy security.

The Moldovan parliament passed a state of emergency with 56 votes in favor, allowing the government to implement measures to prevent and mitigate the threat of insufficient energy resources.

'A historic event'

The halt of Russian gas deliveries through Ukraine, as described by Ukrainian Energy Minister Herman Galushchenko, is a "historic event."

According to a Google translation, Galushchenko stated via Telegram on Jan. 1 that Russia is losing markets and will suffer financial losses.

The European Union has already decided to abandon Russian gas, and the European initiative Repower EU provides for exactly what Ukraine has done today.

Radek Sikorski, the Polish Foreign Minister, celebrated the development as a political triumph, claiming that Putin had attempted to "coerce Eastern Europe through the threat of withholding natural gas deliveries."

Nearly 80% of Germany's gas inventories are currently full, according to the latest data compiled by Gas Infrastructure Europe.

According to Christoph Halser, gas and LNG analyst at Rystad Energy, the EU will need approximately 7.2 billion cubic meters of gas from the LNG market if Azerbaijan or another third party does not transit the gas following a swap deal with Russia.

"The terminals in Poland, Germany, Lithuania, and Italy can forward these volumes to the most affected countries, such as Slovakia and Austria."

Europe's energy security

Eurasia Group's practice head of energy, climate, and resources, Henning Gloystein, stated that Ukraine's decision to halt the flow of Russian gas to the EU was predictable due to both Kyiv and Moscow's previous statements about not renewing a deal under current war conditions.

According to Gloystein, the expiration of the deal does not pose a threat to EU winter energy security, as EU importers have taken measures to prepare for the reduction in supply and the mild winter weather observed across most of Europe.

The Dutch TTF hub, a European benchmark for natural gas trading, saw its front-month gas price increase by 1.2% to 49.49 euros ($51.1) per megawatt-hour on Thursday, according to the Intercontinental Exchange in New York.

The likelihood of gas price fluctuations in the near future will depend on the political developments in the Russia-Ukraine conflict and the remaining winter weather conditions, according to Eurasia Group's Gloystein.

Gloystein stated that negotiations between some EU members (e.g. Slovakia), Russia, and Ukraine to reach a compromise on resuming supplies have been ongoing on the political front. However, there has been no progress during talks around the turn of the year.

He stated that Europe's winter is expected to have above average temperatures, which means the impact of the cuts will be minimal.