Ukraine is Russia’s gateway into European gas markets. Of the 193 billion cubic meters (bcm) Russia’s state-owned Gazprom pumped westward in 2017 – nearly 40 percent of Europe’s total supply – 93 bcm transited via Ukraine. Moscow, however, wants to change that, diminishing Ukraine’s transit role. Kyiv, on the other hand, hopes to maintain the current arrangement, as transit revenues contribute some USD 2-3 billion annually to the Ukrainian economy (roughly 3 percent of GDP) and act as a buffer against further Russian aggression.
The poor state of Ukraine’s energy sector, which is beset by aging infrastructure, overregulation, uncompetitive pricing, and limited diversity of supply, means that Ukraine is economically and strategically reliant on the Russian gas transit, and is buying Russian-sourced gas and coal despite the state of belligerency between Kyiv and Moscow.
