Thursday, January 2

Ukraine has decided not to renew a crucial agreement that allows Russia to send gas to Europe through their territory, leaving Russia's economy in an even tighter spot.

Russia's largest export is oil and gas, making up around 20% of its total GDP. Russia is also the world's second-largest natural gas exporter after the United States and the world's second-largest oil exporter after Saudi Arabia.

The European Union used to be one of the largest buyers of Russian oil and gas, but that amount has dwindled in recent years. According to the European Commission, the volume of oil and gas that the EU imported in the third quarter of 2024 was only 7% of what it had imported in the first quarter of 2021. In 2023, Russian gas made up less than 10% of their gas imports, while that number was 40% in 2021. Due to Russia's war with Ukraine, the EU has attempted to choke off Russia's economy with sanctions and tariffs while decreasing their consumption of Russia's oil and gas. They have managed to make this transition relatively smoothly, and their largest imports of oil and gas now come from the United States, Norway, and various North African countries.

However, while the EU was working towards successfully moving away from Russian oil and gas, there were several pipelines in the way of those efforts. There are 23 gas pipelines traveling from Russia to Europe, but three major ones make up a large portion of their supply.

The Nord Stream pipeline traveled from northern Russia through the Baltic Sea and into Germany, passing the Danish island of Bornholm along the way. In September 2022, both the Nord Stream 1 (NS1) and Nord Stream 2 (NS2) pipelines exploded in the waters around Bornholm due to clear sabotage. It has not been proven as to who conducted the explosions, but Ukraine is the primary suspect.

The second large pipeline between Russia and the EU was the Yamal Europe pipeline, which traveled from Russia across Belarus and into Poland. However, that pipeline was shut down by Poland in 2022 as part of an attempt to move away from Russian oil and gas.

The last large pipeline traveled through Ukraine, but the country was forced to keep it open due to a five-year deal made before the war. The agreement expired this week, though, allowing Ukraine to shut down the pipeline and closing down Russia's last oil and gas passageway to Europe. Gazprom, a Russian company controlling the pipeline, confirmed that they stopped the flow of oil into Ukraine yesterday.

Unfortunately, while the shutdown of the pipeline will have a serious effect on Russia's revenue from oil and gas exports, it may have major repercussions for several European countries.

Slovakia still heavily depends on Russian oil, as it used to be the gateway for Russian oil to enter the rest of the EU. They have confirmed that they will need to pay more for oil from other sources and that gas prices within the country will certainly go up in 2025.

Slovakian Prime Minister Robert Fico was extremely angry over the end of the agreement, threatening to stop supplying electricity to Ukraine. Due to Russia's consistent attacks on Ukraine's power plants, they require electricity from other countries, and losing Slovakia's energy would be a significant hit. However, Poland stepped in and stated that they would make up for the loss while encouraging Slovakia to use alternate routes like other EU countries are doing.

Austria also depends on Russian oil, but they stated that they have shifted to other sources and built up reserves to avoid being in a tight spot.

The country worst affected by the end of the pipeline is Moldova, which relies almost completely on Russian gas and is not part of the EU. Most of Moldova's gas is piped into the unrecognized breakaway region of Transnistria, where it is used to generate power that supplies electricity to most of the country. However, Gazprom has claimed that Moldova maintains over $709 million in debt to them, further pushing them to stop the flow of gas into the country. Moldova, which is sandwiched between Ukraine and Romania, has argued that their debt is only $8.6 million, and while Gazprom is able to send gas into Moldova through other pipelines, they have refused to do so until Moldova pays their alleged debt.

Gazprom has stopped supplying Moldova with gas, leaving the entire region of Transnistria without heat and light in the middle of a cold winter. Temperatures this week are dropping below freezing, leaving citizens with just blankets and electric heaters, if they have them.

To battle this new energy crisis, Moldova has confirmed that they will reduce their electricity exports, and they have urged citizens to conserve power. While they do receive a meager supply of gas from other sources, long blackouts will occur across the region, and Transnistria will likely be the hardest hit. To get back up and running, Moldova will need to either pay the massive bill to Gazprom or quickly shift to other sources-- currently, most of the EU's alternative routes involve gas from the United States, Qatar, or Norway.

Fact of the Day: It takes almost triple as much money to print a $100 bill compared to a $1 bill. Also, printing a $50 bill is 4 cents cheaper than printing a $20 bill! According to the US Federal Reserve, it takes around 3.2 cents to print a $1 or $2 bill. However, $5, $10, $20, and $50 bills are all somewhere between 5 and 6 cents each, and a $100 bill costs 9.4 cents to make.

Quote of the Day: Luxury to me is not about buying expensive things; it’s about living in a way where you appreciate things. (Oscar de la Renta)

Word of the Day (Merriam-Webster): Rejuvenate (verb, rih-JOO-vuh-nayt) - To rejuvenate a person, parts of the body, etc., is to make them feel young, healthy, or energetic again. To rejuvenate something abstract, such as an economy or career, is to give it new strength or energy.

In a Sentence: The hotel package includes a day at the spa to rejuvenate guests.