The contract overseeing the supply of Russian gas to Europe via Ukraine is set to expire at the end of next year, but the impact on Europe will likely be mitigated by the Continent's reduced reliance on Russian energy exports and increased access to new global gas supplies. According to Ukrainian energy minister Herman Halushchenko, Russia's state-owned gas giant Gazprom and its Ukrainian counterpart Naftogaz will not renew their transit contract after it expires at the end of 2024. If confirmed, this would result in the interruption of Russian natural gas supplies to Europe through Ukraine starting in 2025. The current contract, which was signed in 2019, includes the possibility of a 10-year extension beyond 2024. But the chances for such an extension are now ''slim,'' according to Galushchenko, who revealed Ukraine is already preparing for a cut-off. 

• Despite Russia's 2022 invasion of Ukraine, Russian pipeline gas has continued to flow through the war-torn country (mostly ending up in Austria, Slovakia, Italy and Hungary), although at reduced volumes. About half of Russia's gas exports to Europe now come in the form of liquified natural gas (LNG), with the other half roughly equally split between the TurkStream pipeline and pipelines that cut through Ukraine, which account for almost 5% of Europe's total natural gas imports.
• The contract between Gazprom and Naftogaz was brokered in December 2019 with the help of the European Union, Germany and France. The last-minute deal was signed to ensure Russian gas continued to transit through pipelines in Ukraine, in order to avoid a repeat of the 2009 crisis that led to the complete cut-off in supplies to southeastern Europe, which at the time was fully dependent on Russian gas. 
• If it isn't renewed, the Gazprom-Naftogaz contract will expire on Dec. 31, 2024. But the ongoing war in Ukraine could still halt gas flows before then, whether by causing physical damage to the pipeline structure itself, or by prompting Moscow to deliberately cut-off deliveries. 
• If the contract expires next year, Gazprom may still technically provide natural gas supplies to Europe through Ukraine under a more flexible system. The Russian firm could, for example, provide gas through capacity booking on a short-term basis (i.e., month-ahead), replicating a model Gazprom used to send gas through the Yamal-Europe pipeline connecting Russia with Poland and Germany before those supplies were interrupted in May 2022. But this appears highly unlikely given the lack of trust and political support from all parties, particularly as negotiations would have to involve both Russia and Ukraine.

Europe's recent efforts to reduce demand, increase supply and stabilize prices will enable the Continent to withstand further eventual reductions in Russian gas. European natural gas and electricity prices spiked in 2022 as Russia slashed natural gas flows to Europe to retaliate against EU sanctions related to the war in Ukraine. The consequent energy crisis triggered rampant inflation and slowed economic growth across Europe. It also caused the Continent's industrial output to drop dramatically as sky-high gas and electricity bills forced manufacturers (particularly in energy-intensive sectors) to scale back their operations. In response, the European Union and national governments enacted price caps and launched financial support programs to both mitigate the impact of higher energy costs on consumers and businesses as well as stabilize and contain wholesale prices. To weather the crisis with fewer Russian supplies, the European Union also imposed energy-saving policies to reduce demand and took action to increase and diversify its energy supplies. Over the past year, the combined impact of these efforts to boost gas storage levels, switch to alternative energy sources, find new suppliers and cut overall gas consumption has significantly reduced Europe's reliance on Russian gas (which now comprises just over 10% of European gas imports, compared with over 45% before the war). It's also eased wholesale gas prices on the Continent (which fell to a two-year low at the beginning of June), in addition to boosting the European Union's gas inventories (which are now nearing full capacity, exceeding the bloc's storage target three months ahead of schedule).

• Norway usurped Russia as Europe's largest gas supplier in 2022. Pipeline gas and liquified natural gas (LNG) imports into Europe from Azerbaijan, North Africa, Qatar and the United States have also massively increased in recent months.
• Natural gas demand in the European Union fell by an all-time record of 55 billion cubic meters (bcm) in 2022, and is expected to be down by about 60 bcm in 2023 compared with the previous five-year average, according to data from the European Commission. This was due to a combination of policy-, market-, and behavioral-driven changes, along with a milder-than-expected 2022-23 winter.
• Since hitting an all-time high of above 300 euros per megawatt-hour (MWh) in August 2022, natural gas prices in Europe have continued to decline on the back of falling demand and plentiful alternative supplies. Wholesale natural gas prices on the Continent reached a two-year low of €25/MWh at the start of this month, before increasing slightly in mid-June due to outages and maintenance at gas processing plants in Norway. Gas prices in Europe are now on a downward trend again, though the recent Norway disruptions highlight the potential for further volatility amid tight supply and demand balances. 
• Natural gas storage facilities in the European Union are now more than 91% full, according to the latest data from Gas Infrastructure Europe, exceeding Brussels' goal of reaching 90% of total capacity by Nov. 1. 

If the Gazprom-Naftogaz contract isn't renewed at the end of next year, the consequent interruption of Russian natural gas supplies through Ukraine would increase energy prices across Europe, though nowhere near the levels seen in 2022 — particularly as the current global gas tightness is expected to ease significantly in 2025. The expected expiration of the Russia-Ukraine transit agreement in December 2024 means one of the two last remaining Russian natural gas corridors into Europe will be cut off starting from 2025, leaving the TurkStream pipeline delivering gas to Serbia, Hungary and Bulgaria through Turkey as the only active route. With global gas supplies expected to remain tight through the end of next year, prices across Europe will likely increase as the contract expires, even if only a small percentage of supply is removed (as shown by the recent price jump connected to the outages in Norway). The true extent to which prices increase, however, will depend on the amount of gas European countries manage to store ahead of the 2024-25 winter, as well as the overall macroeconomic situation in Europe. It will also depend on Asia's economic climate at the time, which will determine LNG demand from Europe's Asian competitors on the global market. Still, Europe is unlikely to experience the price shocks seen in 2022 thanks to the countermeasures taken at the height of the energy crisis last year, as well as the Continent's ongoing efforts to reduce demand, control price volatility, expand LNG import capacity, and sign new supply deals with other countries. Moreover, the current tightness in the global LNG market is expected to ease significantly right as the Russia-Ukraine transit contract will likely end, with substantial new supplies from Qatar and the United States set to come online beginning in 2025. This should not only help further stabilize gas prices in Europe, but could even see prices decrease despite the loss of Russian supplies through Ukraine (barring any major events that create supply and/or demand shocks, like incidents affecting Europe's gas infrastructure or a particularly cold winter in Europe or Asia).

• If the Gazprom-Naftogaz agreement expires next year, Ukraine would lose out on the related transit fees (which, according to the contract, would have amounted to $7.15 billion over 2020–24, though Kyiv accused Gazprom of never having paid this amount in full throughout the conflict). But the impact on Ukraine's energy security would not be meaningful, as the country does not directly import Russian gas that flows through the pipelines in its territory. Ukraine also now produces nearly enough gas to meet domestic demand, which has dropped significantly since Russia's February 2022 invasion. 
• While demand reduction will help keep natural gas prices under control in Europe, much of that reduction will continue to come from lower industrial consumption. Especially until new LNG supplies come online in 2025, European producers will face higher energy prices (and, in turn, operating costs) compared with their competitors in Asia and North America — creating knock-on effects that will continue to weaken Europe's industrial production and economic growth over the next two years. 

Assuming the Gazprom-Naftogaz contract isn't renewed in December 2024, negotiations to resume flows of Russian gas through Ukraine may even become part of eventual peace talks between Kyiv and Moscow. But those negotiations are unlikely to happen anytime soon, with no near end in sight to the war in Ukraine. Even after the conflict eventually ends, it would still probably take several years to rebuild trust between Kyiv and Moscow, limiting room for cooperation between the two on gas transit for the foreseeable future. Furthermore, the expensive measures already taken by European countries to wean themselves off of Russian energy supplies will also reduce their incentive to resume Russian gas flows through Ukraine, even if Moscow is willing to provide European customers at greatly discounted prices. Italy, for instance, has been working to massively increase pipeline imports from North African countries and readjust its own midstream pipeline network to move volumes northward in a bid to become Europe's new gas hub. It will be almost impossible to reverse many of these measures (such as long-term LNG supply deals or the construction of expensive import infrastructure) for several years, while the parallel reduction in natural gas consumption across the Continent (thanks to efforts to accelerate the energy transition away from fossil fuels) will also reduce the need to re-establish politically and strategically problematic energy cooperation with Moscow.

• An interruption of gas flows through Ukraine would see Europe import even less Russian gas, further robbing Moscow of its ability to weaponize its energy exports to increase pressure on the West. As the Kremlin looks for new ways to preserve this leverage, Russia may start to directly target Europe's energy infrastructure (or threaten to do so) through conventional or unconventional operations (including physical or cyberattacks).