Russia’s energy giant Gazprom has suspended the supply of gas to Poland and Bulgaria, the toughest measure Moscow has taken against a European country since being slapped with international sanctions.
Moscow claimed it halted the supply of gas to to the two countries as they had failed to pay in roubles, a condition announced in March by Russian President Vladimir Putin targeting “unfriendly” countries.
Gazprom’s move has raised concerns that more EU countries, who are heavily reliant on Russian gas, could be hit in the same way as Moscow seeks to hit back against crippling international sanctions.
Why did Russia cut off Poland and Bulgaria?
According to Gazprom, which supplies Europe with 40 per cent of its gas needs, the suspension of gas to Poland and Bulgaria was a result of the two countries rejecting a request to pay for the stock in roubles.
“Payments for gas supplied from April 1 must be made in roubles using the new payments details, about which the counterparties were informed in a timely manner,” Gazprom said.
It said it was halting supplies to Bulgaria’s Bulgargaz and Poland’s PGNiG “due to absence of payments in roubles.”
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Warsaw, which has been at the forefront of efforts to keep Ukraine’s military supplied with equipment to fight Russian forces, and Sofia said the halt was a breach of contract.
Bulgaria and Poland are the only two European countries with Gazprom contracts due to expire at the end of this year, which meant their search for alternative supplies was well underway.
“They were therefore less likely to compromise on Russia’s rouble payment request than others in Europe,” said James Waddell, head of European gas at consultancy Energy Aspects.
Russia has also used its major energy exports to Europe as a lever in its diplomatic efforts against countries which have supported war efforts in Ukraine.
The Kremlin calculated that heavily reliant countries such as Germany would be less likely to join a united front against it due to the domestic shock cutting off imports would produce.
What will happen next?
Fears that more states could be hit, in particular Germany, Europe’s industrial powerhouse which relied on Russia for more than 50 per cent of its gas imports in 2021, sent gas prices soaring and added to jitters about the global economic impact of the war.
On Wednesday, one of the Kremlin’s most loyal politicians suggested Moscow could expand action beyond Poland and Bulgaria.
“The same should be done with regard to other countries that are unfriendly to us,” said Vyacheslav Volodin, the speaker of Russia’s lower house of parliament, the Duma.
According to The Financial Times, gas prices soared by as much as a fifth following news of supplies to Poland and Bulgaria being halted, with the cost now six times higher than this time last year.
European Commission President Ursula von der Leyen said Russia’s action was “unjustified and unacceptable” and accused Moscow of using its gas as an “instrument of blackmail”.
She said the EU had contingency plans in place as member states had been preparing for such a scenario. The Commission’s president said the EU would seek alternative supplies, aiming to refill the bloc’s depleted stores before next winter, while in the meantime, Russia’s payment system could be used without breaching European Union sanctions.
But Europe has few options given the global market for gas was tight as a drum before the crisis escalated. Europe relies on pipelines for most of its gas, and European or North African producers connected to the grid cannot add much more output.
Shipments of liquefied natural gas (LNG) from suppliers further afield are usually booked up in long-term contracts. The United States, which long criticised Europe for relying on Russia, has offered Europe more LNG, but US supplies are not adequate. Even if Europe can secure more LNG, it does not have enough plants to convert the super-cooled liquid back into gas.
Germany plans to build such plants but, for now, has none. Uniper (UN01.DE), Germany’s main importer, said it could pay without violations.Q
Additional reporting by agencies
