Europe’s Russian fuel period involves an finish as Ukraine transit stops

MOSCOW (Reuters) -Russian fuel provides to Europe through Ukraine are set to finish on New 12 months’s Day, bringing down the curtain on Moscow’s lengthy interval of dominance of provide within the European fuel market.

Russia’s oldest fuel export path to Europe – a pipeline relationship again to Soviet days – was set to close on the finish of 2024, as a five-year transit deal between Russia and Ukraine expires. Knowledge from Ukraine’s fuel transit operator confirmed on Tuesday that Russia had not requested any fuel flows for Jan. 1.

The European Union drastically diminished its dependency on Russian fuel after the outbreak of the struggle in Ukraine in February 2022 by in search of different fuel sources.

The remaining patrons of Russian fuel comparable to Slovakia and Austria have organized for different provides, and analysts foresee minimal market influence from the stoppage. European benchmark fuel costs settled at 48.50 euros per megawatt hour on Tuesday, solely marginally up from opening commerce.

Stopping the fuel circulation could have a a lot larger geopolitical significance, nonetheless.

Moscow has misplaced its dominant share of fuel provides to international locations within the European Union to rivals comparable to the US, Qatar and Norway because it invaded Ukraine, which prompted the EU to chop its dependence on Russian fuel.

As soon as the world’s greatest fuel exporter, state-controlled Gazprom (MCX:GAZP) recorded a $7 billion loss in 2023 alone, its first annual loss since 1999.

For Europe, the lack of low cost Russian fuel provides contributed to a significant financial slowdown, a spike in inflation and the worsening of a cost-of-living disaster.

Whereas Europe has been fast to seek out different power sources, the lack of Russian fuel has exacerbated long-term issues about its declining international competitiveness and particularly about Germany’s industrial future.

IMPACT OF UKRAINE WAR

Russia and the Soviet Union spent half a century build up a significant share of the European fuel market, which at its peak stood at round 35%, however the struggle in Ukraine has all however destroyed that enterprise for Gazprom.

Most Russian fuel routes to Europe are shut, together with Yamal-Europe through Belarus and Nord Stream below the Baltic that was blown up in 2022.

The Soviet-era pipeline through Ukraine brings fuel from Siberia through the city of Sudzha – now below the management of Ukrainian troopers – in Russia’s Kursk area. It then flows by Ukraine to Slovakia, the place the pipeline splits into branches going to the Czech Republic and Austria.

Kyiv has refused to barter a brand new transit deal.

Ukraine is giving up some $800 million a yr in charges from Russia, whereas Gazprom will lose near $5 billion in fuel gross sales to Europe through Ukraine.

The tip of the transit deal is unlikely to trigger a repeat of the 2022 EU fuel worth rally because the remaining volumes are comparatively small.

Russia shipped about 15 billion cubic metres (bcm) of fuel through Ukraine in 2023 – solely 8% of peak Russian fuel flows to Europe through numerous routes in 2018-2019.

Gazprom mentioned it might ship 37.2 million cubic metres on Tuesday in comparison with 42.4 mcm on Monday. Later, Ukraine’s fuel transit operator mentioned Russia had not nominated any fuel flows for Jan. 1 by the Ukrainian pipeline to Europe as of 1500 GMT.

The halting of provides through Ukraine will probably be a significant blow to Moldova, a rustic that was as soon as a part of the Soviet Union.

Hungary and different international locations proceed to obtain Russian fuel from the south, through the TurkStream pipeline on the mattress of the Black Sea, though Hungary had been eager to maintain the Ukrainian route as properly.

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