Ukraine is positioning itself as a key transit hub for Azerbaijani gas to Europe, a move that could significantly alter the region’s energy landscape. 

If successful, this would carve out a new role for Kyiv after Russian supplies stopped flowing to the rest of Europe via Ukraine on January 1, pushing up European wholesale energy prices. 

The expiration of the Russian gas deal at the beginning of 2025 and Kyiv's decision not to prolong the agreement triggered heated debates within the European Union as countries like Hungary and Slovakia harshly criticised Ukraine, accusing it of igniting the energy crisis with no drastic impact on Russia. 

The deal's expiration will force Slovakia to pay an extra €177mn in fees for alternative routes, while it triggered a humanitarian crisis in the breakaway Moldovan region of Transnistria, which lost heating and hot water. As for Ukraine, the country will lose fees equivalent to about 0.5% of GDP from ending the transit contract and risks undermining its strategic role in Europe's energy sector. 

This emboldened Kyiv to seek alternative ways of boosting its energy sector and address European concerns regarding the looming crisis. Ukraine’s strategic location offers an opportunity to facilitate energy diversification. In this vein, Ukraine approached Azerbaijan, a long-time fossil fuels exporter to Europe, with an offer to transport Azeri gas to Europe, thus partly replacing the Russian gas. Unlike the initial proposal to transit Russian gas under the "Azeri gas" brand, this time, Kyiv categorically refuses to transit any Russian gas, even under different brands. 

Azerbaijani President Ilham Aliyev and Ukrainian President Volodymyr Zelenskiy held a face-to-face meeting on the sidelines of the Davos Economic Forum on January 22, exchanging views on cooperation in the energy sector and regional security issues. 

During the press conference, Zelenskiy enthusiastically emphasised Azerbaijan's role in Europe's energy sector, mentioning that Baku’s export capacity is 25bn cubic metres (bcm). 

Zelensky’s stance should come as a little surprise considering the critical situation at the front and Russia’s recent advances. By refusing to continue transporting Russian gas and seeking to transport gas from Azerbaijan instead, Kyiv aims to prevent Russia from profiting from European gas exports.  

However, despite Ukraine’s ambitions, the plan faces political, logistical and economic hurdles, including Azerbaijan’s inability to supply meaningful additional volumes of gas to Europe at present. 

Under a 2022 agreement, Azerbaijan committed to increasing its gas exports to the EU from 8.1 bcm in 2021 to 20 bcm annually by 2027 to Southern and Central Europe via Turkey. Although Baku sees Europe as a reliable market for its gas, the bilateral relations between Baku and Brussels have been strained in the last two years due to EU members' frequent criticism of Baku, while the latter accused the EU of double standards. Moreover, Azerbaijani officials have expressed frustration over the EU’s unwillingness to sign long-term gas contracts, claiming that the union is treating the country as a “firefighter” by only committing to short-term gas deals while asking to boost export volumes amid the Russo-Ukraine war. 

This reluctance stems from the EU’s commitment to reducing fossil fuel reliance and achieving carbon neutrality by 2050. Nonetheless, Azerbaijan argues that without long-term commitments, securing investment for new energy projects and infrastructure expansion remains challenging. 

A long-term contract would enable Baku to raise additional funds and build additional infrastructure to increase gas production in the Caspian Sea and meet Europe’s growing demand. This would undoubtedly enhance Azerbaijan's position in relation to the EU, enabling it to leverage additional gas exports to Europe in exchange for political concessions. 

For now, the proposed route for exporting Azeri gas via Ukraine would involve leveraging the Trans-Balkan Pipeline, which runs through Turkey, Bulgaria, Romania and Ukraine. This infrastructure previously carried Russian gas to the Balkans but has been underutilised in recent years. By reversing its flow and linking it to Azerbaijan’s Southern Gas Corridor (SGC), Ukraine could help facilitate gas deliveries to European markets such as Poland, Germany and the Baltic states. 

However, expanding Azerbaijani gas exports requires additional investment in pipelines and gas fields, which remains uncertain without guaranteed buyers. Additionally, Azerbaijan has existing commitments to Turkey, Italy, and the Balkans, raising questions about whether enough supply would be available to support a Ukrainian transit corridor.

At the same time, Brussels remains cautious about financing new gas projects, fearing backlash from climate activists and member states committed to green energy transitions. As such, the long-term success of this initiative would depend on overcoming geopolitical opposition, securing EU investment commitments, and ensuring Azerbaijan has sufficient gas capacity for additional exports. If Ukraine can navigate these hurdles and secure necessary investments, it could reshape the European energy map and reinforce its role as a key energy transit hub in the post-Russian gas era.

Fuad Shahbazov is a policy analyst covering regional security issues in the South Caucasus. He was a research fellow at the Center for Strategic Studies and previously a senior analyst at the Center for Strategic Communications, both in Azerbaijan. He was also a visiting scholar at the Daniel Morgan School of National Security in Washington, DC. He tweets at @fuadshahbazov.