On January 1, the five-year transit contract between Ukraine’s Naftogaz and Russia’s Gazprom for Russian gas expired, costing the Ukrainian treasury up to $800 million annually. Meanwhile, a ten-year agreement for the transit of Russian oil via the Druzhba pipeline—running from Russia through Belarus and Ukraine to Hungary, Slovakia, and the Czech Republic—remains in effect. While Ukraine technically and legally has the capacity to halt this oil transit, doing so would have significant repercussions. Here’s a breakdown of what such a decision might mean for Kyiv.
Ukraine’s Financial Stakes in Oil Transit
Ukraine earns substantially less from oil transit than gas transit—about $250 million annually compared to $800 million. In stark contrast, Russia generates $6 billion annually from both gas and oil transit, which fuels its economy and indirectly supports its military capabilities. This disparity has not gone unnoticed in Kyiv. Andriy Kobolev, former head of Naftogaz, has advocated for citing “force majeure” to terminate the oil transit contract, pointing out that oil pipelines, unlike gas pipelines, require electricity for operation.
Former President Petro Poroshenko has also joined the call to halt oil and gas transit. In January 2025, he introduced a draft law to ban transit during martial law, framing it as a “geopolitical step.” However, critics suggest Poroshenko’s move might be motivated by his dwindling political popularity, with his approval ratings dropping from 55% in 2014 to less than 4% by 2018.
Opposition from Energy Experts and CEOs
Despite public pressure, many Ukrainian experts and CEOs of state-owned companies have anonymously voiced opposition to cutting off Russian oil transit. They argue that such a move would be politically, economically, and strategically unwise. Stopping the oil flow could spark tensions with European nations like Hungary and Slovakia, which rely on this supply. Prime Minister Denys Shmyhal has also warned that halting oil transit would likely lead to international arbitration and financial penalties for Ukraine.
At the same time, the Ukrainian government appears to be consulting with the European Union about potential support for such a decision. However, Brussels has shown little appetite for endorsing an oil transit ban, as exceptions on “security grounds” remain a contentious issue.
Financial Losses From Non-Extension of the Gas Contract
Ukraine’s reluctance to halt oil transit is also linked to the financial impact of the recently expired gas contract with Gazprom. Kyiv is projected to lose $1.5 billion in 2025 due to the absence of direct payments for gas transit and the costs of maintaining its gas transmission system (GTS). Energy experts highlight that Ukraine itself, not Russia or the EU, has borne the heaviest financial burden from the non-renewal of this agreement.
Balancing Economics and Politics
As the debate continues, Ukrainian politicians and experts are increasingly focusing on the economic rationality of maintaining transit agreements. With Brussels hesitant to support a full transit ban and fears of legal and financial repercussions mounting, Kyiv faces a difficult balancing act between its political goals and the harsh economic realities of its decision.
