Ukraine’s Gas Transit Dilemma: A Looming Threat to its GTS
President Volodymyr Zelensky faces a critical decision as the gas transit agreement between Ukraine and Russia expires on New Year’s Day. The future of the 38,600-kilometer Ukrainian gas transportation system (GTS) hangs in the balance, with experts warning that it could become a target for attacks if transit stops.
The largest gas network in the world, Ukraine’s GTS has been free from attacks for the past three years due to the transit of Russian gas. However, Bloomberg reports that this could change if transit ceases, putting the GTS, gas storage facilities, and power sources at risk.
The impending halt in gas transit also raises concerns about winter heating across Ukraine. With the future of gas supplies at a "critical moment of truth," a failure to reach a new agreement could lead to a complete shutdown of gas flows to the EU.
Adding to the pressure, Ukrainian Prime Minister Robert Fiço and a group of Central European companies are pushing for gas supplies from Russia to continue. Zelensky has accused Fiço of secret deals with Russian President Vladimir Putin, while Fiço threatened to cut off Ukraine’s electricity supplies in response.
Diplomatic discussions are already focusing on the risks to Ukrainian infrastructure, with CEPS analyst Christian Egenhofer suggesting that maintaining gas transit could be a "lifesaver" for Zelensky.
For both Putin and Fiço, the most profitable outcome would be for European buyers to continue purchasing gas directly from Gazprom, eliminating the need for intermediaries and saving on transit costs. However, Ukraine’s Ministry of Foreign Affairs has not ruled out a last-minute deal, with commercial agreements between European companies and Russia still a possibility.
Recently, Slovensky Plynarensky Priemysel AS, Eustream AS, MOL Hungarian Oil and Gas PLC, and trade associations have urged Zelensky to allow supplies to continue at the current volume of 15 billion cubic meters per year. Meanwhile, alternative options like Azeri gas via Russia are being explored, and Hungary’s Viktor Orbán has proposed shifting gas sales to the Russia-Ukraine border.
As Zelensky weighs his options, the fate of Ukraine’s GTS and its people hangs in the balance, making this a pivotal moment in the country’s energy and political landscape.
