You again stepped on a rattlesnake? Now there is no stopping for Putin.

Introduction

Ukraine has taken a much dangerous step. Both sides is a steep valley and Ukraine is bound to fall to a state of no recovery.

Last time, 2014, Ukraine lost Crimea as it refuse to extend the agreement for the Sevastopol naval base, home to Russia’s Black Sea Fleet, critical for projecting power into the Mediterranean and beyond.

This time Ukraine will loose all.

Ukraine decision

Ukraine’s decision to halt Russian gas transit through its pipelines will have several consequences

Economic Loss for Ukraine

Ukraine will lose approximately $800 million annually in transit fees.

Impact on Russia

Russia faces a significant financial hit, with losses estimated at $5-6.5 billion annually from reduced gas exports to Europe.

Energy Security in Europe

While Europe has diversified gas imports, some countries, like Slovakia and Moldova, may face energy shortages and higher costs.

Geopolitical Tensions

This move escalates economic and political tensions between Ukraine, Russia, and affected EU nations

Ukraine economy slow down

Halting Russian gas transit will exacerbate Ukraine’s economic challenges.

The country stands to lose approximately $800 million annually in transit fees, further straining an economy already reeling from war, which caused a 30% GDP contraction in 2022.

Ukraine’s recovery depends heavily on external financing and reconstruction efforts, with costs estimated at $486 billion over the next decade.

While GDP growth is projected at 3-4.7% in 2024-2025, this decision could reduce foreign investment confidence and worsen inflation due to higher energy import costs.

Reshape of global energy market

Halting Russian gas transit through Ukraine will reshape global energy markets in several ways

Increased LNG Demand

Europe will further pivot to liquefied natural gas (LNG) imports, intensifying competition and potentially driving prices higher, especially as new LNG capacity comes online.

Market Volatility

Reduced Russian gas supply to Europe will exacerbate geopolitical tensions, disrupting price stability and supply chains globally.

Shift to Renewables

The crisis may accelerate clean energy adoption, as countries seek to reduce dependence on fossil fuels for energy security.

Loss to Russia

Halting Russian gas transit through Ukraine will negatively impact Russia’s military funding by reducing its export revenues, which are crucial for sustaining its record-high defense budget.

Russia has allocated 40% of its 2025 federal budget to defense, amounting to $145 billion, despite economic challenges like inflation, a weakened ruble, and sanctions.

The loss of gas transit revenues could deepen financial imbalances, forcing Russia to rely more on domestic taxation and cuts to non-military sectors, potentially straining its economy further.

However, Russia’s prioritization of military spending suggests it will continue funding its war efforts despite these pressures.

New Black Sea route

The Black Sea export corridor has significant implications for Ukraine’s exports

Increased Export Volumes

The corridor has allowed Ukraine to export over 50 million tonnes of grain in the 2023-24 marketing year, marking a 3% year-on-year increase despite war-related challenges.

Diversification of Exports

Unlike the previous grain deal, the new route supports not only agricultural products but also industrial goods like iron ore and metals, boosting Ukraine’s industrial production.

Global Food Security

The corridor ensures continued grain supplies to Middle Eastern, Asian, and African markets, vital for global food stability.

Security Risks

Russian attacks on port infrastructure and floating mines remain key challenges, though international demining efforts aim to mitigate these risks.

Challenges for new Black Sea corridor

Ukraine’s new Black Sea corridor faces several challenges

Security Risks

Russia will increase attacks on port infrastructure, floating mines, and threats from naval drones pose significant dangers to shipping. Russia strategy is to completely disrupt this route hence exports.

Infrastructure Limitations

Decades of underinvestment and war damage have left Ukraine’s transport and logistics infrastructure in need of repair, complicating efficient exports.

Higher Costs

Ukraine bears heavy insurance costs to encourage shipping, adding financial strain. Additionally, alternative routes like the Danube remain less efficient and more expensive.

Russian Aggression

Continued threats aim to disrupt Ukraine’s agricultural exports, impacting revenue and trade relationships.

Conclusion

Either way, in addition to the loss of revenue and a slowing economy, Ukraine may face increased aggression from Russia.

Given Putin's pattern of behavior, it is likely he will become more aggressive and hostile toward Ukraine.

Ukraine is engaging in a risky strategy, as its actions will have implications for Europe, particularly Moldova and Slovakia. This situation could lead to increased demand for gas and higher prices, ultimately impacting consumers. Ukraine must recognize that Europe is economically fragile and has mixed reactions regarding support for Ukraine.

We are observing two potential scenarios that are quite plausible. First, Russia may launch a severe attack on Ukraine, which could have catastrophic consequences, including the loss of property, human life, or even the nation itself, possibly involving nuclear weapons.

The second possibility involves former President Trump, who enjoys attention and taking credit; he might pressure Ukraine to reopen the gas pipeline. This move could come at a cost to the United States, but Trump appears indifferent to these consequences.