The current gas transit deal between Russia and Ukraine expires at the end of 2024, with Vladimir Putin having already said there was no time left to renew the contract. Will eastern EU members be hit the hardest?
Currently, Russian gas is still flowing through Ukraine’s pipeline network to the European Union (EU), generating revenue for Kremlin leader Vladimir Putin and funding his war against Ukraine. The Russian has claimed without Russian gas the bloc won’t be able to meet its energy needs.
For Ukraine, by contrast, the gas transit deal has always meant first and foremost filling Putin’s war chest, even though some of the revenue Russia gains from its exports via Ukraine stay in Kyiv as transit fees.
Now, as the year 2024 ends, Ukraine will not renew the gas transit agreement with Russia, as announced by President Volodymyr Zelenskyy on December 19 in Brussels. Ukraine will no longer allow Moscow to “earn additional billions” while continuing its aggression against the country.
Russian President Putin also confirmed the contract’s termination, telling reporters in a televised briefing on December 26 that a new contract was “impossible to conclude in 3-4 days.”
Putin laid the blame firmly on Ukraine for refusing to extend the agreement.
The end of the agreement, however, raises questions about gas supply in landlocked eastern EU countries, which cannot import liquefied natural gas (LNG) by sea. Austria, Hungary, and Slovakia still rely on Russian gas via Ukraine which is why the governments there are eager to continue purchasing Russian gas.
Before the Ukraine war, Russia was the world’s largest exporter of natural and Europe was Moscow’s most important market. European governments prioritized access to cheap energy over concerns about doing business with Putin.
The mutually beneficial relationship began more than 50 years ago, when the former Soviet Union needed funds and equipment to develop its Siberian gas fields. At the time, the western part of then still divided Germany sought affordable energy for its growing economy, and signed the so-called pipes-for-gas deal with Moscow, under which West German manufacturers supplied thousands of kilometers of pipes to transport Russian gas to Western Europe.
This energy relationship persists, as European importers are often locked into long-term contracts that are difficult to exit.
According to the Brussels-based think tank Bruegel
, EU fossil fuel imports from Russia amounted to about $1 billion (€958 million) per month at the end of 2023, down from $16 billion per month in early 2022. In 2023, Russia accounted for 15% of the EU’s total gas imports, trailing Norway (30%) and the US (19%), but ahead of North African countries (14%). Much of this Russian gas flows through pipelines via Ukraine and Turkey.
Major consumers include Austria, Slovakia, and Hungary. Additionally, countries like Spain, France, Belgium, and the Netherlands still import Russian LNG by tanker, some of which mixes with other gas sources in Europe’s pipeline network. As a result, it may even reach Germany, despite its efforts to forgo Russian gas.
Following Russia’s invasion of Ukraine in 2022, gas prices surged dramatically — at times by more than 20 times — forcing some European factories to cut production and many small businesses to close. Prices have since dropped but remain above pre-crisis levels, making energy-intensive industries, particularly in Germany, less competitive.
European consumers are also suffering from high energy prices, prompting many to reduce consumption amid a severe cost of living crisis. The additional expenses are a significant burden: Nearly 11% of EU citizens struggled to adequately heat their homes in 2023, according to the EU Commission.
The termination of the Ukraine-Russia agreement is already factored into European gas market forecasts, according to an EU Commission analysis reported about by Bloomberg in mid-December.
The EU is confident in its ability to secure alternative supplies.
“With more than 500 billion cubic meters of LNG produced each year globally, the replacement of around 14 billion cubic meters of Russian gas transiting via Ukraine should have a marginal impact on EU natural gas prices,” Bloomberg cites from the commission’s document, which is not yet public. “It can be considered that the end of the transit agreement has been internalized in the winter gas prices.”
The EU has long argued that member states still importing Russian gas via the Ukraine route — particularly Austria and Slovakia — could manage without these deliveries. Therefore, the EU commission said it would not enter negotiations to keep the route open.
According to the Commission, member states have been able to reduce their gas consumption by 18% since August 2022 compared to the five-year average. Moreover, the United States is expected to create new LNG capacities over the next two years, and these supplies could help the EU address potential disruptions.
“The most realistic scenario is that no Russian gas will flow through Ukraine anymore,” the EU commission said, adding the bloc was “well-prepared” for this outcome.
Despite EU assurances, Hungary and Slovakia remain anxious about their gas supplies and their ongoing close ties to Russia. Hungarian Prime Minister Viktor Orban, for example, is seeking ways to maintain gas deliveries through Ukraine, even though the country’s current imports largely rely on the TurkStream pipeline.
Orban has floated unconventional ideas, such as purchasing Russian gas before it crosses into Ukraine. “We are now trying the trick … that what if the gas, by the time it enters the territory of Ukraine, would no longer be Russian but would be already in the ownership of the buyers,” Orban told a briefing, according to the Reuters news agency. “So the gas that enters Ukraine would no longer be Russian gas but it would be Hungarian gas.”
Hungarian Prime Minister Orban is a staunch supporter of Russian gas and wants flows via Ukraine to continueImage: Denes Erdos/AP/picture alliance
Slovakia has taken a more confrontational approach, threatening countermeasures against Ukraine. Prime Minister Robert Fico suggested halting emergency electricity supplies to Ukraine after January 1 if no agreement is reached. “If necessary, we will stop the electricity shipments that Ukraine needs during outages,” Fico said in a Facebook video.
In respons to the threat, Ukrainian President Volodymyr Zelenskyy accused Fico of acting under Russian orders, stating on social media platform X that it appears Putin directed him to “open a second energy front against Ukraine.”
Fico remains one of the EU’s strongest opponents of military aid to Ukraine. During a surprise December visit to Moscow, Fico claimed Putin reaffirmed Russia’s willingness to continue supplying gas to Slovakia.
Ukraine has excluded 41 states and added 9 to the list of countries whose transactions with counterparties are subject to control under the transfer pricing (TP) law, according to Resolution No. 1505 of December 27, published by the Cabinet of Ministers on its website on Monday.
“Taking into account the provisions of the law No. 3813-IX dated 18.06.2024 “On Amendments to the Tax Code of Ukraine regarding the peculiarities of tax administration during states for taxpayers with a high level of voluntary compliance with tax legislation”, the updated list of states (territories) will contain 46 states (territories) instead of 78,” the Ministry of Finance noted in the commentary to the resolution.
The Ministry of Finance clarified that the list includes states from the list of offshore zones approved by the government and the FATF blacklist. FATF, as well as states (territories) that do not ensure timely and complete exchange of tax and financial information.
We are talking about 9 states and territories: American Samoa, Guam, DPRK, Myanmar, Namibia, Netherlands Antilles, Alderney, Trinidad and Tobago, Fiji, and Guam.
At the same time, the Ministry of Finance added, the states with which Ukraine has concluded international treaties for the avoidance of double taxation are excluded.
According to the adopted resolution, 41 countries or territories were removed from the list, including: Bahrain, Bosnia and Herzegovina, Brunei, Burundi, Cape Verde, Cape Verde, China Hong Kong Special Administrative Region (EU), Djibouti, Dominican Republic, Ireland, the Autonomous Community of the Canary Islands of the Kingdom of Spain, Cuba, Guadeloupe, Guatemala, Kyrgyzstan, Cyprus, the Autonomous Province of Kosovo and Metohija of the Republic of Serbia, Cuba, Curacao, Laos, Lebanon, Mauritius, and Qatar.
The list also includes the Macao Special Administrative Region of China, the Former Yugoslav Republic of Macedonia, the Federal Territory of Labuan Malaysia, Morocco, Martinique, and the Federated States of Micronesia, Moldova, the United Arab Emirates, Oman, Paraguay, the Commonwealth of the Northern Mariana Islands, the Autonomous Region of Madeira of the Portuguese Republic, San Marino, Sao Tome and Principe, Sudan, Timor-Leste, Turkmenistan, Uzbekistan and Montenegro.
According to the resolution, it will come into force on January 1, 2025.
As reported, according to the Law “On Amendments to the Tax Code of Ukraine on Transfer Pricing”, which entered into force on September 1, 2013, the TP rules apply to controlled transactions with residents of low-tax jurisdictions (income tax rate in which is 5 percentage points or more lower than the Ukrainian rate).
On Monday, Danylo Hetmantsev, the head of the relevant parliamentary committee, said that about 35,000 taxpayers have already submitted their first reports on controlled foreign companies (CFCs), and the budget has received an additional UAH 1.88 billion.
“By the way, tomorrow, December 31, is the last day of a difficult but productive year of 2024. This is the last day to submit full CFC reports for 2023,” he reminded.
Hetmantsev added that on December 26, amendments to the Code regarding fines for failure to submit information and CFC reports came into force, but everyone will have the opportunity to report within six months after the lifting of martial law, without fines.
State-owned Ukrgasbank (UGB, Kyiv) has announced the launch of contactless payment acceptance technology for small businesses through the UGB Tap&Pay application for Android smartphones in cooperation with Visa, the financial institution’s press service said on Friday.
“Mobile acquiring is based on Visa Tap to Phone contactless payment technology, which allows you to use a smartphone on the Android operating system version 8.0 and higher as a POS terminal. Now entrepreneurs no longer need a physical terminal – download UGB Tap&Pay and accept payments conveniently and instantly,” the state bank’s press release explains.
The press service of the financial institution clarified that the acquiring fee is 1.3%. “Ukrgas plans to launch this service on smartphones with the iOS operating system next year.
According to the National Bank of Ukraine, as of November 1 this year, Ukrgasbank ranked 5th (UAH 136.18 billion) among 62 banks operating in the country in terms of total assets. The financial institution’s net profit for the first ten months of this year amounted to UAH 4.84 billion, while in the same period last year it was UAH 3.36 billion.
Ukrainian hospitals are preparing to launch MRI machines purchased from the state budget and delivered in 2024.
According to the state-owned enterprise Medical Procurement of Ukraine, in 2024, medical institutions received 15 MRI units.
The MRI machines have already started working in a number of medical institutions, including the Pavlohrad Intensive Care Hospital (Dnipro region) and Sumy Regional Clinical Hospital.
According to the Ministry of Health, it takes an average of three months from the moment of delivery to the moment of the first direct use in patient diagnosis.
As reported, in 2023, the Ministry of Health purchased 28 MRI machines worth UAH 2.27 billion, including 22 machines with a capacity of 1.5 Tesla and six machines with a capacity of 3 Tesla.
Pharmacy sales in Ukraine in January-November 2024 increased by 10.77% in monetary terms compared to the same period in 2023 to UAH 174.22 billion, while in physical terms they decreased by 4.99% to almost 1.059 billion packages.
According to Business Credit, according to its research, the weighted average price of pharmacy basket goods during this period was UAH 165.07, which is 16.6% more than in the same period in 2023.
At the same time, pharmacy sales of medicines in January-November 2024 amounted to UAH 136.889 billion, which is 10.91% more than in the same period in 2023, but in physical terms, pharmacy sales of medicines decreased by 5.53% to 740.71 million packs.
The weighted average retail price of medicines in January-November 2024 amounted to UAH 184.81 per unit, which is 17.41% more than a year earlier.
Pharmacy sales of dietary supplements in 11 months increased by 11.28% in monetary terms to UAH 17.99 billion, while in physical terms they decreased by almost 3.04% to 89.873 million packs. The weighted average price in this segment increased by 14.76% over 11 months compared to the same period in 2023, to UAH 200.17 per unit.
As reported, in January-June 2024, pharmacy sales in Ukraine increased by 12.67% in monetary terms compared to the same period in 2023 to UAH 94.784 billion, while in physical terms they decreased by 4.7% to 583.21 million packs. The weighted average price of pharmacy basket products for this period amounted to UAH 162.52, which is 18.25% more than in the same period of 2023.
At the same time, pharmacy sales of medicinal products in January-June 2024 amounted to UAH 74.258 billion, which is 12.68% more than in the same period of 2023, but in physical terms decreased by 5.13% to 408.796 million packs. The weighted average retail price of medicines in January-June 2024 amounted to UAH 181.65 per unit, which is 18.67% more than a year earlier.
