Ukraine Switches From Russian To U.S. Gas

The new year is bringing a seismic shift for war-torn Ukraine’s energy systems.

Even as Russia’s military rained missiles down on Ukrainian cities, Moscow’s state-owned gas giant, Gazprom, has earned billions selling fuel to Europe via Ukraine’s Soviet-era pipeline network. But Russia’s invasion made negotiating a renewal deal with Kyiv impossible, and Gazprom’s five-year contract to transit gas through Ukraine expired on New Year’s Day.

So this month, Ukraine is getting a new gas supplier: the United States.

The first shipment of American gas into Ukraine marks a milestone in Washington’s bid to replace Russia as Europe’s top source of the fuel most used for heating and electricity.

Analysts say the delivery — just weeks before President-elect Donald Trump’s inauguration, and amid what is forecast to be a particularly cold winter — offers a direct appeal to an American leader who campaigned on expanding U.S. exports of natural gas but whose Republican Party is split on whether to continue military support for Kyiv.

“The historic significance of this moment can’t be understated,” said Olga Khakova, the deputy director for European energy security at the Atlantic Council’s Global Energy Center. “This provides opportunities for Ukraine to be seen as an energy partner and not just be seen through the lens of being a charity case, which Ukraine is not.”

Last April, the U.S. took the top spot as the world’s No. 1 exporter of liquefied natural gas, a version of the fuel that’s been super-chilled to a liquid form to make shipping easier. Two months later, Ukraine’s largest private energy company, DTEK, announced a deal to start buying LNG from Virginia-based Venture Global, one of the U.S.′ biggest producers.

On Dec. 4, a gas tanker carrying 100 million cubic meters of fuel departed Calcasieu Pass LNG terminal in Louisiana. The vessel arrived at a port in Greece on Dec. 27, where special equipment turned the liquefied fuel back into gas that was then pumped into storage containers and the local energy system.

Shipping the gas along the patchwork of pipelines connecting Greece to Ukraine would be expensive on top of the already-steep cost of transporting the fuel across the Atlantic Ocean. As a result, most of the gas arriving from Louisiana will end up burned in Greece. On paper, however, DTEK traded that shipment of American fuel for an equivalent supply of gas currently in storage units in Hungary and Bulgaria.

That means just some of the physical gas molecules expected to flow into Ukraine sometime in the coming days actually came from the U.S. Most of the gas making its way to Ukraine now came via pipelines from Norway, but some includes LNG shipped to Germany from the U.S. None of the gas originated in Russia, DTEK said.

Still, DTEK called the debut delivery a “symbolic” step meant to “test the route, test the mechanics of the deal and test the terminals” before ramping up shipments from the U.S. The company predicted flows would “definitely increase” over the next four years.

“The next administration will be even more supportive of the investment into the gas industry, the transportation of gas, and building new LNG production terminals,” Dmytro Sakharuk, DTEK’s executive director, told HuffPost via a Zoom call from Kyiv last week.

“The number of ships and volumes will increase,” he added. “We want to be part of that. We think it’s very important, not just from a commercial point of view but also a political point of view.”

For much of the past two decades, Europe has depended on cheap Russian gas shipped westward via pipelines to power its industries, keep homes warm in the winter, and transition away from coal, which typically produces far more lung-damaging and planet-heating pollution than gas when burned. Europe’s largest economy, Germany, increased its reliance on Russian gas even more in 2023, when Berlinshuttered all Germannuclear power plants.

Before invading Ukraine, Moscow started restricting flows of gas to countries in the U.S.-led NATO alliance. Once the war started, those European nations sought alternatives to Russian gas, sales of which were financing the conflict. And as a fracking boom transformed the U.S. into a top producer of gas and oil, American companies stepped in to fill the gap.

Last January, the Biden administration paused federal permitting approvals for new LNG terminals as the Department of Energy completed a study examining the economic and environmental effects of the export boom. But a federal judge in Louisiana overturned the Biden administration’s pause months later, and the Energy Department started approving new permits again in September. While the freeze is still technically being contested in court, Trump vowed on the campaign trail to end the freeze on Day 1 of his next presidency.

If planned construction continues U.S. LNG export capacities will have nearly doubled by the time Trump’s next term expires. By 2028, the U.S. will have the capacity to ship 232 billion cubic meters of LNG overseas per year, up from 126 billion today and far ahead of second-place Qatar’s 171 billion.

That is enough to meet global demand for LNG for decades to come, according to a long-awaited study from the Energy Department, published last month. Citing that research, U.S. Energy Secretary Jennifer Granholm, in trying to defend the LNG pause Biden backed, warned that lifting restrictions on more LNG exports threatened to raise Americans’ energy bills at home and would dangerously increase planet-heating emissions.

The analysis “exposes a triple-cost increase to U.S. consumers from increasing LNG exports,” she said in a statement. That includes the “increasing domestic price of the natural gas itself [and] increases in electricity prices,” given that gas is the top source of electricity in many U.S. power markets.

American industry would also end up paying $125 billion more for energy, Granholm said, “leading to additional potential price increases for a wide range of consumer goods.”

Urging Congress and federal regulators to limit LNG exports, the Industrial Energy Consumers of America, a trade association representing U.S. manufacturers, pointed out how large a share of U.S. gas output is destined for overseas compared to other fossil fuel production. While the U.S. exports just about 10% of its gasoline and less than a quarter of its crude oil, the LNG export facilities already approved today have the capacity to export volumes equal to more than half the net supply of gas produced in the U.S. in the entirety of 2023.

“For crude and gasoline, the U.S. has a Strategic Petroleum Reserve. There is no equivalent for natural gas,” Paul Cicio, the president of IECA, said in a statement. “Consumers are completely exposed.”

Ukraine’s bid to become a new distributor of imported American natural gas isn’t just about cementing ties with the U.S.

Among the countries most affected by the end of Russian gas shipments through Ukraine’s pipelines are Slovakia and Hungary, who will help decide the fate of Ukraine’s bid to join the European Union and whose leaders have maintained closer relations with Russia than most in the continental bloc.

“What the Ukrainians are trying to do is to put themselves in a position to have more leverage over Hungary and Slovakia and potentially make them a little friendlier to the Ukrainian position in this war as we head into negotiations,” said George Beebe, the director of grand strategy at the Washington-based Quincy Institute for Responsible Statecraft.

DTEK said its imports “bring new additional volumes into the region that will decrease” thespikein gas prices from the loss of the Russian supply.

“If you have enough gas, nobody is nervous about volumes,” said Sakharuk. “That’s why the price stays stable.”

The new supply may do little to ease the burden on Moldova, Europe’s poorest nation and the country most impacted by the halt in Russian pipeline shipments, as HuffPost previously reported.

Making Ukraine a major market for U.S. LNG depends first on reaching a settlement of the war, since the local economy can only use so much fuel as the nation’s infrastructure lays in ruin from ongoing fighting, Beebe said. Even then, he said, Ukraine is likely to remain a relatively small import hub compared to ports in Germany and the Baltics, where U.S. tankers are currently offloading fuel.

“Could it be politically significant in that Ukraine is sending a signal it wants to align itself with Trump’s priorities in Europe? That helps marginally,” Beebe said. “The Ukrainians are trying to do everything they can to ingratiate themselves with Trump, knowing their future is heavily dependent on decisions the Trump administration makes on policies toward Ukraine and the terms on which the war might get settled.”