European gas prices jumped Friday after the gas pipeline transit deal that allowed Russia to send gas to some European countries via Ukraine through a key pipeline expired, raising concerns about supply security. 

As reported by the Telegraph, the benchmark European gas price rose more than 2% to around €47 ($51) per megawatt hour, the highest price level witnessed in three weeks. 

The price increase followed remarks by Russian President Vladimir Putin that there was not enough time to strike a new contract for gas transit through Ukraine before the existing agreement expired at the end of the year. 

“They announced that they would not renew the contract,” Putin said in a televised briefing Thursday. “There is no contract, and it is impossible to conclude it in three or four days.” 

Despite the ongoing war between the two countries, Russia has continued to export gas to several European nations via the Urengoy–Pomary-Uzhhorod pipeline, also known as the Brotherhood pipeline, under long-standing deals predating the conflict. 

The pipeline crosses Ukraine’s northeastern border near Sudzha, runs southwest across the Dnipro River, and then westward over the border near Uzhhorod, supplying countries including Slovakia, Hungary, and Austria. These nations have maintained closer ties with Moscow than many other European Union states. 

Gas sales via the Ukrainian pipeline have generated billions of dollars in annual revenue for Moscow and about $1 billion in transit fees for Ukraine. Reuters analysis, based on a Moscow average price forecast, estimated Russia’s 2024 sales via Ukraine at around $5 billion. 

However, Ukraine has repeatedly stated it would not renew the five-year deal, increasing the reliance of Russia’s remaining European customers on already constrained alternative routes, such as pipelines through Turkey. 

Ukrainian President Volodymyr Zelenskyy has said his country would only consider a new transit deal if Russia is blocked from receiving payments until the end of the war, a condition unacceptable to Moscow. He has also criticized Slovakia for its continued reliance on Russian gas, calling it a “big security issue.” 

Europe’s Reliance on Russian Gas

Slovakia relied on Russian gas via Ukraine for 60% of its 2023 supplies but maintains that the end of the pipeline deal will not affect consumption. Slovakia has been leading an effort, supported by Hungarian, Austrian, and Italian companies, to extend the arrangement. 

Hungary depends on Russian oil, gas, and coal for 80% of its energy needs, and Austria received over 90% of its gas from Russia before a contract dispute with Gazprom in November led to supply cuts. 

The rest of the EU has significantly reduced its dependence on Moscow. Before the war, almost half of the continent’s gas supplies, about 150 billion cubic meters, came from Russia. In 2023, this fell to 15%, or about 43 billion cubic meters. 

Previously, much of the Russian gas arrived via pipelines. However, other routes, such as the Yamal-Europe route via Belarus and the Nord Stream pipeline under the Baltic Sea, have been closed. The only other available route to Europe is via the Blue Stream and TurkStream pipelines to Turkey under the Black Sea.