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Tensions Rise as Ukrainian Forces Reportedly Seize Key Gas Transit Station in Sudzha

Published August 08, 2024
9 months ago


In a significant development amidst ongoing hostilities, Ukrainian forces are reported to have seized a crucial gas transit facility in Sudzha, located in the Kursk region of Russia. The importance of this station cannot be overstated as it stands as the principal conduit for Russian gas exports to Europe through Ukraine.


This information, emerging from Russian pro-war Telegram channels, notably the ones operated by Yury Kotenok and Rybar, suggests that Sudzha might be under an "operational encirclement." However, this narrative lacks official corroboration, leaving room for speculation regarding the strategic consequences of this action.


Despite the reports of the station’s capture, Reuters mentions, citing both Gazprom and the Ukrainian Gas Transmission System Operator (GTSO), that gas delivery to Europe continues uninterrupted. As per the GTSO, the daily transit through Sudzha is proceeding as expected, with 41.6 million cubic meters traversing the route on Thursday.


As to Gazprom's declarations, it has scheduled 39.4 million cubic meters for Wednesday's transit, a slight dip from Tuesday's 42.4 million cubic meters. Such figures emphasize the route's robustness, channeling around 42 million cubic meters daily and close to 14 billion cubic meters annually.


These developments, nonetheless, have rippled through energy markets, driving spot gas prices in Europe up by more than 5% to $430, as accounted by Bloomberg. The heightened prices reflect market sensitivities to any potential disruptions in energy supply, particularly the sole operational station at Sudzha after Sokhranivka ceased function in May 2022, owing to Russian occupation in parts of Ukraine's Luhansk Oblast.


The scale of gas transit through Ukraine has seen a significant decline, with current volumes transported being only 34% of those in 2021, as reported by The Insider. Gazprom had promised substantial quantities but fell short, pumping only 15 billion cubic meters last year, with Sudzha being the only operational entry point.


Market experts suggest that if Ukraine solidifies its grip over the station, Gazprom may be forced to halt supplies and possibly invoke a “force majeure” clause, citing uncontrollable circumstances as the pretext. This action would not only affect Gazprom's export revenue — slashing it by approximately 7-8 billion euros — but would also dent Ukraine’s earnings from transit fees.


Ukraine, although faced with the prospect of losing $800 million annually, already contends with financial strain as Russia underpays for transit services, and Naftogaz endures losses due to reserved but unused capacity. A contractual dispute has escalated to the Stockholm Arbitration Court, with a ruling anticipated in early 2026.


Several European countries are tied to the Russian gas supply chain through Ukraine, including Austria, Slovakia, and Hungary, with the former witnessing a stark increase in dependency since the Russian invasion.


The situation in the Kursk Region continues to evolve, with reports from the Russian Armed Forces noting involvement from around 1,000 Ukrainian servicemen. The region has experienced relentless combat activity for 24 hours, evidencing the escalating tensions in the area.



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