EXPLAINER: What’s the fallout from Ukraine’s pipe shutdown?

May 11, 2022, 7:40 AM | Updated: May 12, 2022, 3:52 am

The shutdown of a gas pipeline in eastern Ukraine has sent a fresh wave of energy jitters through Europe.

The price of gas jumped — then fell. The cutoff is in sharp focus because it’s the first time that the war has disrupted the Russian natural gas that flows through Ukraine to get to Europe, where it powers factories and generates electricity.

Here are key things to know:


The operator of the gas pipeline system, Gas TSO of Ukraine, said it could no longer transport gas through a compressor station in the Luhansk region in eastern Ukraine, near the border with Russia. It said it had no operational control over the station in Russian-held territory, with occupying forces interfering in the station’s operation and diverting gas in a way that endangered the stability of the pipeline system.

The company said it repeatedly told Russian state-owned gas exporter Gazprom about threats to flows from such interference but that its appeals were ignored.

The pipeline handles around a third of Russian gas heading to Europe. The Ukrainian operator said the gas flows could be made up through another pipeline that crosses from Russia into Ukraine near the town of Sudzha.

Gazprom said that was not possible, but gas flows at Sudzha rose overnight, by about 8 million cubic meters per day.


While Russia has halted natural gas to Poland and Bulgaria over a dispute about payments in rubles, Wednesday’s cutoff is the first disruption in gas supplies flowing through Ukraine due to the war.

Any suggestion that energy supplies are vulnerable sends prices higher. Spot gas prices rose 4% at the open of trading Wednesday, to 103 euros per megawatt. They later eased, to around 95 euros per megawatt hour, below where they were Tuesday.

European governments aren’t happy about sending hundreds of millions of dollars a day to Russia for energy but haven’t been able to agree on a natural gas boycott because of heavy dependence of major economies like Germany and Italy. The European Union’s executive commission has proposed a phaseout of Russian oil but has run up against resistance from reliant countries like Hungary.

Economists estimate that a total cutoff of both oil and natural gas would throw Europe into a recession. A loss of gas alone would hit industries such as metals, fertilizer, glass and ceramics that have already throttled back production in some cases due to high gas prices. And consumers would face even higher electric and heating bills than they already do.

To avoid those outcomes, the EU has proposed cutting Russian gas imports by two-thirds by the end of the year through additional supplies of pipeline gas from Norway and Azerbaijan, more purchases of liquefied gas that comes by ship, faster rollout of wind and solar, and conservation. Whether that can be achieved remains to be seen.


Tom Marzec-Manser, head of gas analytics at the ICIS market intelligence firm, said the Ukraine move “is not a huge cutoff to gas supplies.” He described it as a loss of a few percent in overall European gas supply, when considering imports and domestic production.

“Nevertheless, it is worrying to the market that a development like this has happened,” he said, noting concerns about possible energy sanctions that could interrupt deliveries and the gas cutoff to Bulgaria and Poland. “But it is not fundamentally altering the supply and demand balance in the European gas market.”

Before the war, the share of Russian gas that flowed to Europe through Ukraine had fallen to around 18%. Of that, about a third goes through this particular part of the pipeline system that was shut down. That can be up to 32.6 million cubic meters a day; in recent days, it has been around 23 million cubic meters a day.

Much but not all of that gas could be rerouted through the pipeline entering Ukraine near Sudzha, said Zongqiang Luo, a gas analyst at Rystad Energy.

Even with added capacity through that town, some 10 million cubic meters per day of gas would still be in search of a pipeline route to get to Europe, and “where exactly is not clear as capacity in seemingly full,” Luo said.

Over the course of a year, that daily flow would amount to around 3.6 billion cubic meters of gas, out of the roughly 150 billion cubic meters that Europe imports from Russia. It isn’t a huge amount by comparison, but gas supplies are scarce, prices are high and gas importers and governments are scrambling to find all the non-Russian gas supplies they can.


Thanks to mild weather, Europe is in better shape on gas after scraping through the winter with barely adequate reserves. Reserves are filling faster than they did last year, but that needs to continue to cover demand this coming winter.

The interruption would make it harder for European countries to meet their goals for storage levels next winter and would “hasten Europe’s plans to move away from imports of Russian gas,” Luo said.

“As the European gas grid is well integrated, no one country is likely to suffer any immediate impact, but this will put further strain on the system and place a floor on downside price movement,” Luo added.

Germany is receiving a quarter less gas through Ukraine, the Energy Ministry said Wednesday. Increased supplies from Norway and the Netherlands are partly compensating for the shortfall, said Annika Einhorn, a ministry spokeswoman.

She noted that the majority of Russian gas reaches Germany through the Nord Stream 1 pipeline under the Baltic Sea rather than via Ukraine.


Both Gas TSO of Ukraine and Gazprom have sought to underline their reliability as gas suppliers despite the enmity fueled by the war so analysts are still trying to figure out what the game is. Barbara Lambrecht at Commerzbank said, “It remains to be seen whether the disruption to supply turns out to be anything more than just a flexing of muscles.”

Tim Ash, senior emerging markets sovereign strategist at BlueBay Asset Management, said it could be about forcing Europe’s hand.

“I think frustrations are building in Ukraine that Europe is proving too slow in rolling out an energy embargo on Russia,” he said. “If Europe is not prepared to shut off the energy money printing machine for Moscow, why would Ukraine not take matters into their own hands?

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Most Americans are sleepy new Gallup poll finds...

Associated Press

Most Americans say they don’t get enough sleep, according to new Gallup poll

A new Gallup poll found that most Americans are sleepy — or, at least, they say they are. Multiple factors play into this.

12 hours ago

Near-total abortion ban in Arizona dates back to Civil War era...

Associated Press

Near-total abortion ban dates back to 1864, during the Civil War, before Arizona was a state

The near-total abortion ban resurrected last week by the Arizona Supreme Court dates to 1864, when settlers were encroaching on tribal lands.

13 hours ago

Tracy Toulou...

Associated Press

How to tackle crime in Indian Country? Empower tribal justice, ex-Justice Department official says

A recently retired director of the Justice Dept. says the federal government hasn't given tribal justice systems equal recognition.

1 day ago

Speaker of the House Mike Johnson...

Associated Press

House Speaker Mike Johnson says he will push for aid to Israel and Ukraine this week

House Speaker Mike Johnson said Sunday he will try to advance wartime aid for Israel this week, along with funding for Ukraine.

2 days ago

President Joe Biden speaks at a campaign rally Saturday, March 9, 2024, at Pullman Yards in Atlanta...

Associated Press

US shoots down ‘nearly all’ Iran-launched attack drones as Biden vows support for Israel’s defense

Joe Biden cut short a weekend stay at his beach house to meet with his national security team as Iran launched an attack against Israel.

3 days ago

Protesters in Phoenix shout as they join thousands marching around the Arizona state Capitol after ...

Associated Press

Abortion ruling supercharges Arizona to be an especially important swing state

A ruling this week instituting a near-total abortion ban supercharged Arizona's role, turning it into the most critical battleground.

3 days ago

Sponsored Articles


Condor Airlines

Condor Airlines can get you smoothly from Phoenix to Frankfurt on new A330-900neo airplane

Adventure Awaits! And there's no better way to experience the vacation of your dreams than traveling with Condor Airlines.


Collins Comfort Masters

Here’s 1 way to ensure your family is drinking safe water

Water is maybe one of the most important resources in our lives, and especially if you have kids, you want them to have access to safe water.


Fiesta Bowl Foundation

The 51st annual Vrbo Fiesta Bowl Parade is excitingly upon us

The 51st annual Vrbo Fiesta Bowl Parade presented by Lerner & Rowe is upon us! The attraction honors Arizona and the history of the game.

EXPLAINER: What’s the fallout from Ukraine’s pipe shutdown?