Ukraine will not allow transit of Russian gas with Azeri label, Zelenskyy says, dashing Slovak hopes

Ukraine will no longer allow the transit of Russian gas through the country's territory after the end of this year, Volodymyr Zelenskyy announced on Thursday after meeting with leaders of the European Union in Brussels.

The ban, he added, will apply to any gas flow "coming from Russia" to avoid the risk of having Russian gas sold to Europe under the guise of Azerbaijan-made gas.

"We're not going to extend the transit of Russian gas," Zelenskyy told reporters.

"We won't allow them to earn additional billions on our blood. And any country in the world that can get something cheap from Russia will eventually become dependent on Russia – whether it happens in one month or one year. That's their policy."

The statement is set to go down badly with Robert Fico, the prime minister of Slovakia, a landlocked country that remains highly dependent on Russia's pipeline gas.

Slovakia imports three billion cubic metres from Gazprom, Russia's gas monopoly, every year, covering most of its domestic demand.

A major transit agreement between Ukraine and Gazprom, from which Kyiv earns constant revenue, is set to expire at the end of this year. The agreement accounts for half of Russia's pipeline gas exports to the EU, according to Bruegel.

Although Russia's pipeline gas exports to the bloc have plunged since the start of the full-scale invasion, a share of supplies continues moving unabated, freed from sanctions.

With the end of transit fast approaching, Slovakia has stepped up diplomatic efforts to ensure the country's energy flows are not disrupted.

As an alternative, Bratislava might resort to Azerbaijan, a small country in the Caucasus that has positioned itself as an affordable option for Europe to replace Russian gas. Deals with Azerbaijan are controversial due to the country's poor human rights record.

Under the scheme, Bruegel explains, Russia would supply gas to Ukraine labelled as "Azeri gas" while Azerbaijan would buy gas from Russia labelled "Russian gas" using the same infrastructure.

"In simple terms, there would be no change in the gas flows: EU traders would buy gas from Azerbaijan, which would buy gas from Russia," Bruegel said in an October study.

But on Thursday, Zelenskyy made it clear he would not tolerate such a deceitful operation, arguing the Kremlin would still earn money and, as a result, retain a key source of revenue to finance its costly and brutal invasion. He did not mention Azerbaijan by name but the Financial Times journalist who asked the question did.

"We don't want to play a game where this other country receives gas from Russia and then transits it. This is the same as continuing to profit from this war and sending money to Russia," Zekenskyy said in his reply.

The Ukrainian leader offered one exemption to the ban: Ukraine would allow the transit of Russian gas if the European buyer agreed not to pay Russia until the war ended. Doing so, though, would most likely result in a breach of contract and a halt from Gazprom.

"We will think about that," he said. "But we would not give Russia any chance to make additional billions that would be put into the war."

Slovakia's main gas buyer SPP has warned the loss of Eastern supplies would cost an additional €150 million in higher fees. According to Zelenskyy, Ukraine also stands to lose money from ending the transit of Russian gas. (Bruegel puts the number at 0.5% of GDP.)

"To be honest during the war, it's a bit shameful to talk about money because we're losing people," Zelenskyy said.

The news is expected to further sour ties between Kyiv and Bratislava.

Zelenskyy and Fico have had strained relations since the Slovak populist returned to power in October last year. Fico has gradually aligned himself with Hungary's Viktor Orbán to adopt a position deeply sceptical of military support for Ukraine.

"Ukraine won’t be invited to NATO. It will lose a third of its territory. There will be foreign military forces there," Fico said the day before the summit in Brussels.

Slovakia is in contact with both the Ukrainian government and the European Commission, which advocates the complete phase-out of Russian gas, to find a solution before the transit agreement between Ukraine and Gazprom ends.

"We are holding very intense talks at an international level on gas supplies in 2025," Fico said last week. "There are many hurdles, such as political statements by the Ukrainian side, the pressure on the suspension of supplies from the East to the West, proposals on gas deliveries that are much more expensive, including transit duties, which we reject. We see no reason to pay for gas more than required due to geopolitical reasons."

The halt in transit of Russian gas through Ukraine could also affect Austria and Hungary, although to a different extent. Earlier this month, Austria's OMV utility terminated its long-term contract with Gazprom after Russia cut off supplies, an incident that Chancellor Karl Nehammer denounced as "blackmail."