On Wednesday, the supply of Russian gas via Ukraine to the EU decreased by a quarter as Ukraine's pipeline operator declined to continue taking gas from Russian-controlled regions of Ukraine.

"Ukraine is no longer responsible for the transmission of Russian gas through Ukrainian territories under Russian military occupation," stated Naftogaz, the Ukrainian government-owned gas firm.

It is the first time since Russia invaded Ukraine on February 24 that Kyiv has endangered Russian gas exports; despite the destruction and bloodshed of the invasion, gas has continued to flow freely across Ukraine to customers in Germany, Italy, Austria, and other European nations.

Ukraine urges the EU to cease purchasing Russian gas, which pays the Kremlin billions of dollars, but EU countries have only pledged to wean themselves off Russian gas supplies "before 2030." Ukraine also receives approximately €2 billion years from Russia's Gazprom in gas transit fees – vital funds for a war-ravaged nation.

The Ukrainian gas grid operator GTSOU announced Tuesday evening that it could no longer regulate and monitor portions of its pipeline system in a Russian-occupied area in eastern Luhansk. The operator also accused occupying forces of interfering with the operations of the pipelines, including "including unauthorized gas offtakes from the gas transit flows, endanger[ing] the stability and safety of the entire Ukrainian gas transportation system." which endangers the stability and safety of the entire Ukrainian gas transportation system.

"Years of Russian propaganda falsely claimed that the Ukraine was stealing gas. In arbitration, they were unable to produce any evidence "CEO of Naftogaz Yuriy Vitrenko stated on Wednesday. "As Russia took further territory, 'pro-Russian separatists' backed by the Russian military stole gas that was supposed to be the responsibility of Ukraine. Ironic."

GTSOU demanded that Gazprom move its gas flows from the interconnector known as Sokhranivka to a cross-border point farther to the northwest known as Sudzha, which is still under Ukrainian authority.

This "is about the theft of gas and the inability of GTSOU to be responsible for maintaining transit volumes," the operator explained in a statement.

Supply change

Gazprom initially stated that such a shift was technologically unfeasible but ultimately obliged and reported that it was supplying 72 million cubic meters (mcm) to European clients on Wednesday, down from 95.8 mcm the previous day, as reported by Russia's TASS news agency. Gazprom and Gazprom Export declined to comment.

Gazprom's suspension of flows to eastern Ukraine halted gas supply to the separatist republics of Luhansk and Donetsk, supported by Russia.

"Representatives of the enemy prevented Ukraine from transporting gas to consumers in the districts of Luhansk and Donetsk. The Russian government is wholly accountable for such actions' humanitarian implications, "GTSOU CEO Sergiy Makogon stated on Facebook.

Tom Marzec-Manser, head of gas analytics at ICIS, stated that all of Russia's pipelines deliver approximately 300 mcm per day to Europe, with less than one-third of that amount passing through Ukraine. Russia provides roughly 40 percent of the EU's gas supply.

"Yesterday Sokhranivka was set to carry 24 million cubic meters," stated Marzec-Manser. "Based on the change in [transit] requests for today it appears some shifting of volumes has happened upstream in Russia — not to the fullest extent, but there has been some compromise, might be a way of putting it."

The price of gasoline increased marginally on Wednesday morning but rapidly returned to its previous level.

"It looks like things are not as quite as bad as it first seemed," Marzec-Manser said.

Although not all of the contested gas deliveries can be diverted to Sudzha, other options include the Yamal Europe pipeline through Poland.

The war has wreaked havoc on the European gas markets, and Ukraine's actions are a part of this. In addition to the EU's resolve to end its long-term reliance on Russian gas, key clients like Germany intend to shift even more quickly. Robert Habeck, minister of the economy and climate, projected that it would take his country until the middle of 2024 to terminate its dependency on Russian gas. According to a new analysis, an immediate halt to Russian gas may result in a 12 percent decline in Germany's GDP.

Gazprom also halted deliveries to Poland and Bulgaria last month due to their refusal to comply with Kremlin demands for contract modifications and paymentștiin rubles. Gazprom cautioned that it had the right to continue transferring gas to other clients through Polish pipelines when it ceased supply to Poland.

Currently, Ukraine does not restrict access to its EU allies.

It is impossible to monitor the situation on the ground in real-time because of a lack of public live gas flow data. A GTSOU representative said Wednesday that more information would be provided following a crisis meeting.

Caroline Bain, the chief commodities economist at Capital Economics, stated, "Perhaps the key takeaway from today’s news is that natural gas is not off-limits as far as the war in Ukraine is concerned, which creates considerable uncertainty about supply over the coming months."