Russia’s state gas supplier has said it will cut supplies to Europe via a major pipeline, leading to price spikes and boosting President Vladimir Putin’s willingness to use energy as a weapon against the EU.
Gazprom has said gas flows will no longer be possible through the Yamal pipeline after the Kremlin imposed sanctions on European gas companies late Wednesday. The sanctioned companies include some of its own former units, as well as Yamal-owned Europol Gas. The pipeline runs from Russia to Germany via Poland.
“A ban on transactions and payments to sanctioned entities has been introduced,” Gazprom said in a statement. “For Gazprom, this means a ban on the use of a gas pipeline owned by Europol Gas to transport Russian gas through Poland.
The move wiped out the flow of Russian gas to Europe from a second pipeline in so many days and underscored Moscow’s appetite for warnings to cut off gas supplies to Europe.
“Overall, the situation is escalating,” said Robert Habeck, Germany’s economy minister. “Again, it is becoming clear that Russia is using energy as a weapon.
The response raised gas prices. Future contracts related to TTF, the European benchmark for wholesale gas prices, jumped about 13 percent on Thursday to about 106 euros per megawatt-hour, more than four times a year ago.
Prices rose this week from a low of about 90 euros per megawatt-hour as Russian gas supplies to the continent faced new threats.
Electricity prices have also risen. German electricity prices next year reached their highest level of the year at more than 230 euros per megawatt-hour, according to Refinitiv.
On Wednesday, the Ukrainian pipeline operator stopped the flow of gas from one of the two major pipelines delivering Russian gas through the country to Europe, citing intervention by Russian occupation forces.
While very little gas has flowed through the Yamal-Europe pipeline in recent weeks, it is relied on when gas demand rises.
Tom Marcek-Manser, head of gas analysis at ICIS, a commodity data firm, said sanctions against Europol Gas could be problematic for Germany’s energy security next winter as gas demand rises.
Sanctions from Moscow, which they say were imposed in response to a number of Western sanctions, also ban Russian companies from selling gas or doing business with Gazprom Germany, a group of gas trading and storage companies that were taken over by the German government last month. . .
Gazprom Germania’s assets include Rehden, Germany’s largest gas storage facility, which accounts for about a fifth of the country’s total capacity, as well as Germany’s major gas distributors Wingas, WIEH and WIEE, which buy supplies from Gazprom.
Germany has acknowledged that Russia’s actions are already having an impact. Habek said supplies had fallen by 10 million cubic meters a day, or 3 percent of Russian gas on an annual basis. But he insisted it was “manageable.”
“Volumes can be bought on the market from other sources, and that is the task we face in buying these quantities,” he said. “The German government will do everything possible to stabilize Gazprom Germany.
He said the situation did not require a gas supply alarm, adding that Germany was “prepared for this situation, as well as for all other possible scenarios”.
According to the Oxford Institute for Energy Research, Moscow’s sanctions could reduce gas supplies to Europe by 13 billion cubic meters. Russia supplied the EU with 155 billion cubic meters of gas last year, or about 40 percent of its needs.
Michael Mueller, CEO of RWE, one of Germany’s largest gas buyers, said he appreciated the impact of the sanctions, but agreed that the Russians “do not have to fill the gas storage facilities that fall under Gazprom Germany.” These facilities were depleted before the war began after Russia cut off supplies in the winter.
The European Commission said it was “analyzing Russia’s decision to impose sanctions on certain EU companies and the implications for security of gas supply in the EU”.
It says the move underscores the need to reduce dependence on Russian energy. He will unveil a proposal to increase alternative supplies, renewable energy and hydrogen on May 18th.
Gas traders have been focusing for weeks on a new ruble payment mechanism requested by Russia, which has cut off Russian gas to Poland and Bulgaria and could erupt again later in May, when payments have to be owed by more European buyers.
Additional reports from Andy Bounds in Brussels
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