*

Ukraine gas transit deal expires on Jan 1

*

European gas price reaction is muted

*

Russia has lost EU gas markets to US, Norway, Qatar

*

EU industrial decline exacerbated by loss of Russian gas

MOSCOW, Dec 31 (Reuters) - Russian gas supplies to

Europe via Ukraine are set to end on New Year's Day, bringing

down the curtain on Moscow's long period of dominance of supply

in the European gas market.

Russia's oldest gas export route to Europe - a pipeline

dating back to Soviet days - was set to shut at the end of 2024,

as a five-year transit deal between Russia and Ukraine expires.

Data from Ukraine's gas transit operator showed on Tuesday that

Russia had not requested any gas flows for Jan. 1.

The European Union drastically reduced its dependency on

Russian gas after the outbreak of the war in Ukraine in February

2022 by seeking alternative gas sources.

The remaining buyers of Russian gas such as Slovakia and

Austria have arranged for alternative supplies, and analysts

foresee minimal market impact from the stoppage. European

benchmark gas prices settled at 48.50 euros per megawatt hour on

Tuesday, only marginally up from opening trade.

Stopping the gas flow will have a much bigger geopolitical

significance, however.

Moscow has lost its dominant share of gas supplies to

countries in the European Union to rivals such as the United

States, Qatar and Norway since it invaded Ukraine, which

prompted the EU to cut its dependence on Russian gas.

Once the world's biggest gas exporter, state-controlled

Gazprom recorded a $7 billion loss in 2023 alone, its first

annual loss since 1999.

For Europe, the loss of cheap Russian gas supplies

contributed to a major economic slowdown, a spike in inflation

and the worsening of a cost-of-living crisis.

While Europe has been quick to find alternative energy

sources, the loss of Russian gas has exacerbated long-term

concerns about its declining global competitiveness and in

particular about Germany's industrial future.

IMPACT OF UKRAINE WAR

Russia and the Soviet Union spent half a century building up

a major share of the European gas market, which at its peak

stood at around 35%, but the war in Ukraine has all but

destroyed that business for Gazprom.

Most Russian gas routes to Europe are shut, including

Yamal-Europe via Belarus and Nord Stream under the Baltic that

was blown up in 2022.

The Soviet-era pipeline via Ukraine brings gas from Siberia

via the town of Sudzha - now under the control of Ukrainian

soldiers - in Russia's Kursk region. It then flows through

Ukraine to Slovakia, where the pipeline splits into branches

going to the Czech Republic and Austria.

Kyiv has refused to negotiate a new transit deal.

Ukraine is giving up some $800 million a year in fees from

Russia, while Gazprom will lose close to $5 billion in gas sales

to Europe via Ukraine.

The end of the transit deal is unlikely to cause a repeat of

the 2022 EU gas price rally as the remaining volumes are

relatively small.

Russia shipped about 15 billion cubic metres (bcm) of gas

via Ukraine in 2023 - only 8% of peak Russian gas flows to

Europe via various routes in 2018-2019.

Gazprom said it would send 37.2 million cubic metres on

Tuesday compared to 42.4 mcm on Monday. Later, Ukraine's gas

transit operator said Russia had not nominated any gas flows for

Jan. 1 through the Ukrainian pipeline to Europe as of 1500 GMT.

The halting of supplies via Ukraine will be a major blow to

Moldova, a country that was once part of the Soviet Union.

Hungary and other countries continue to receive Russian gas

from the south, via the TurkStream pipeline on the bed of the

Black Sea, although Hungary had been keen to keep the Ukrainian

route as well.

($1 = 0.9601 euros)