Russian Strikes Knock Out Half of Ukraine’s Gas Production

Russian strikes in recent days have wiped out more than half of Ukraine’s domestic natural gas production, likely forcing the war-battered country to spend 1.9 billion euros ($2.2 billion) on fuel imports to survive the looming winter.

Kyiv told its allies earlier this week that a massive Russian barrage targeting the Kharkiv and Poltava regions on Oct. 3 took out roughly 60% of the country’s gas production, according to people with knowledge of the matter. They requested anonymity because the discussions are private.

Ukraine’s gas infrastructure — able to meet domestic demand before the Russian full-scale invasion — has come under increasingly intensive missile and drone strikes since the beginning of this year.

If the strikes continue, Ukraine expects it will need to buy roughly 4.4 billion cubic meters of gas by the end of March, at a cost of nearly 2 billion euros, according to people familiar with the details. That’s the equivalent of nearly 20% of Ukraine’s annual consumption.

Since the attacks, Ukraine has made urgent appeals to its Group of Seven partners for equipment to repair its energy system and reiterated long-standing requests for more air defense systems to help protect energy infrastructure. It’s also seeking financial support to pay for the needed gas imports.

“Russia will do everything to prevent us from extracting our gas,” Ukrainian President Volodymyr Zelenskiy told reporters in Kyiv on Monday. “They will do everything. It will be difficult to protect all this. The task is to have money to import gas so that people have gas.”

Gas is essential during the often harsh winters in Ukraine, where households rely almost entirely on the fuel for heating. Russia has targeted the country’s energy infrastructure every winter since its invasion in February of 2022 to erode the civilian population’s morale and support for resisting Moscow’s war.

So far this year, Ukraine has purchased 4.58 billion cubic meters of gas from foreign suppliers, including 3.67 billion since the end of the last heating season. While Kyiv has estimated that by the end of this year the country’s import needs will reach 5.8 billion, it told allies earlier this week the figure may rise because of Russian attacks, according to the people.

Increased gas supplies to Ukraine from the European Union could tighten the region’s market, and the concerns have already contributed to a rally in European gas prices earlier this week. The EU gas inventories are still below historic norms, leaving the region vulnerable to potential disruptions. Cold winter could quickly drain reserves and cause more price spikes, adding pressure on consumers.

Ukraine in the first place will seek to rely on more domestic extraction, Zelenskiy told reporters in Kyiv on Wednesday. But if there’s “a strong attack on all gas infrastructure,” it will resort to imports and knows “where to find the money required.”

The exact amount of gas Ukraine requires will depend on a number of factors, including the speed of repairs at damaged facilities and the impact of any future airstrikes, Energy Minister Svitlana Grynchuk said on Tuesday.

Ukraine’s national energy company Naftogaz declined to comment, but in a post on LinkedIn its CEO Sergii Koretskyi said he had a “productive” meeting with G-7 representatives and had spoken to the International Monetary Fund and other partners.

“Our partners understand the full complexity of the situation,” he wrote.

A key risk for Kyiv is that damage to domestic production may worsen as both Ukraine and Russia continue to increase strikes on each other’s energy infrastructure. Ukraine has also targeted Russian refineries in an attempt to curb the vast revenue Moscow gets from energy exports, which is then funneled into the war effort.

Russia intensified its strikes after Ukraine halted the transit of Russian pipeline gas to the European Union at the beginning of the year.

While Ukraine has survived previous winters with generators and helping civilians during winter power blackouts, there’s rising concern that it won’t be possible to repair the damage from the spate of recent attacks before the end of winter.

And the costs are mounting. The bill for emergency energy repairs is estimated to be around 758 million euros, according to people familiar.

Kyiv estimates the cost of direct physical damage to the energy sector since the start of the invasion at $20.51 billion, including $14.8 billion in the electricity sector, $1.35 billion in the gas sector and $1.7 billion in the oil sector. The figures don’t include losses related to the Zaporizhzhia nuclear power plant, which Moscow’s forces seized early in the war.

Ukraine is also looking for funds to purchase drone interceptors and longer-range military capabilities to defend against the attacks. On Monday, Zelenskiy implored allies to help pay for another batch of US weapons.

The European Bank for Reconstruction and Development, the European Investment Bank and the European Commission are already considering additional aid to help Ukraine’s energy sector, according to the people. Naftogaz already got a 500 million euro loan from the EBRD in August to finance emergency purchases, and received a 300 million euro loan from the EIB earlier this month.

“The Commission is deeply concerned about the damage inflicted by Russia on Ukraine’s energy infrastructure,” said Anna Kaisa Itkonen, the commission’s spokesperson for energy. “We remain in close contact with Ukraine on the overall energy situation in the country.”