Ukraine stopped the flow of Russian gas to several European countries on New Year’s Day, ending Moscow’s decades-long dominance of European energy markets.

Russian state energy giant Gazprom confirmed that gas exports to Europe via Ukraine were suspended at around 8am local time (5am London time) on Wednesday.

The widely expected move marks the end of a five-year transit agreement between Russia and Ukraine, with neither side willing to strike a new deal amid the ongoing war.

Ukrainian President Volodymyr Zelensky said last month that Kiev was not ready to extend the transit of Russian gas, adding: “We will not concede the possibility that additional billions will be made on our blood.”

Russia, which has been transporting gas to Europe via Ukrainian pipelines since 1991, says European Union countries will suffer most from the shift in supply. Moscow can continue to transport gas via the TurkStream pipeline, which connects Russia with Hungary, Serbia and Turkey.

According to Reuters, the stop will see Ukraine lose up to $1 billion annually in transit fees from Russia, while Gazprom is expected to lose nearly $5 billion in gas sales.

The European Commission, the EU’s executive arm, said it had been working with EU member states most affected by the end of the gas transit deal to ensure the entire 27-nation bloc was prepared for such a scenario.

Slovakia, Austria and Moldova are among the countries most at risk from the shutdown. According to Rystad Energy, in 2023 they were the European countries most dependent on transit volumes of Russian gas: Slovakia imported around 3.2 billion cubic meters that year, Austria received 5.7 billion cubic meters and Moldova 2 billion cubic meters.

Austria has insisted it was well prepared for the disruption, but others were far more concerned.

Slovak Prime Minister Robert Fico warned that Ukraine’s termination of the gas transit agreement would have a “drastic” impact on the EU without harming Russia. Fico also threatened to cut electricity supplies to neighboring Ukraine.

The prime minister, a vocal critic of EU support for Ukraine in the ongoing war, made a surprise visit to Moscow just before Christmas for talks with Russian President Vladimir Putin.

Moldova, which is not a member of the EU, declared a 60-day state of emergency last month over energy security concerns.

A total of 56 members of Moldova’s 101-seat parliament voted in favor of a nationwide state of emergency, which the government at the time said would allow the country to take a range of measures to prevent and mitigate the threat of insufficient energy resources.

Ukrainian Energy Minister Herman Galushchenko described the suspension of Russian gas deliveries via Ukraine as a “historic event”.

“Russia is losing markets, it will suffer financial losses,” Galushchenko said on Telegram on Jan. 1, according to a Google translation.

“Europe has already decided to stop using Russian gas. And the European initiative Repower EU envisages exactly what Ukraine did today,” he added.

Separately, Polish Foreign Minister Radek Sikorski hailed the development as a political victory and accused Russia’s Putin of trying to “blackmail Eastern Europe by threatening to cut off gas supplies.”

The latest data from industry group Gas Infrastructure Europe shows that gas storage facilities in the EU are around 73% full. In Germany, Europe’s largest economy and largest gas consumer, inventories are currently at almost 80%.

“Without Azerbaijan or another third party relaying the gas following a swap agreement with Russia, the EU will require around 7.2 billion cubic meters of gas to be purchased from the LNG market,” says Christoph Halser, gas and LNG analyst at Rystad Energy. said in a research note.

“Terminals in Poland, Germany, Lithuania and Italy could transfer these volumes to the most affected countries such as Slovakia and Austria.”

Henning Gloystein, practice leader of Eurasia Group’s energy, climate and resources team, said Ukraine’s decision to stop the flow of Russian gas to the EU was no surprise as both Kiev and Moscow have long stated that they were unwilling to renew the electricity deal under the current wartime conditions.

In a research note, Gloystein said the deal’s expiry would not threaten the EU’s winter energy security, citing measures by EU importers to prepare for the supply cut and mild winter weather across most of Europe.

Gloystein said gas price trends in the coming months will likely depend on political developments in the Russia-Ukraine war and remaining winter weather conditions.

“At the political level, there are ongoing discussions between some EU member states (e.g. Slovakia, where many of the Ukrainian pipelines enter the EU), Russia and Ukraine to find a compromise that would allow some resumption of supplies could. However, there was such a “There was no progress in the negotiations around the turn of the year,” said Gloystein.

“On the weather front, above-average temperatures are currently expected for the remainder of the European winter, meaning the impact of the cuts will be limited,” he added.

According to New York’s Intercontinental Exchange, first-month gas prices at the Dutch TTF hub, a European benchmark for natural gas trading, last rose 1.2% on Thursday to 49.49 euros ($50.78) per megawatt hour .