Kyiv, UKRAINE: General Director of the Transmission System Operator of Ukraine LLC (GTSOU) Sergei Makogon. GTSOU will block Russian gas flows through two key entry points into Russian-occupied territory from Wednesday, May 11, 2022.
Yulia Ovsyanikova / Ukrinform / Future Publishing via Getty Images
Natural gas prices in Europe have jumped after Ukraine’s state-owned grid operator cut off Russian flows through a key entry point.
Ukraine’s gas operator on Tuesday announced force majeure – unforeseen circumstances that hamper the implementation of the agreement – the first of its kind since Russia invaded Ukraine on February 24th. She said she would not accept flows through her entry point in Sohranovka, which supplies Russian gas to Europe, from Wednesday.
The operator also blocked the transport of gas through its Novopskov border compressor station, through which almost a third of the gas (up to 32.6 million cubic meters per day) is transported from Russia to Europe.
TTF European natural gas prices rose more than 6.4% around 9:15 a.m. London time on Wednesday, according to Refinitiv.
Both the Sokhranovka gas meter station and Novopskov are located in the Russian-occupied regions of eastern Ukraine, and GTSOU has blamed “occupiers’ actions” for disrupting gas transit.
“As a result of the Russian Federation’s military aggression against Ukraine, several GTS facilities are located in territory temporarily controlled by Russian troops and the occupation administration,” the GTSOU said in a statement.
“Currently, the State Tax Inspectorate cannot carry out operational and technological control over the Novopskov CS and other assets located in these territories. In addition, the intervention of the occupying forces in the technical processes and changes in the modes of operation of the GTS facilities, including unauthorized gas. receivables from gas transit flows have threatened the stability and security of Ukraine’s entire gas transmission system. “
The operator said it would still be able to meet its transit obligations to European partners by diverting gas to the Suja interconnection point, which is located in Ukrainian-controlled territory.
“The company has repeatedly informed Gazprom of threats to gas transit due to the actions of the Russian-controlled occupation forces and stressed the cessation of interference in the operation of the facilities, but these calls were ignored,” added GTSOU.
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Sergei Kupriyanov, a spokesman for Gazprom, said Ukraine’s request would be “technologically impossible” and that the company saw no reason to decide, the Associated Press reported.
Timothy Ash, senior sovereign strategist for EM at BlueBay Asset Management, said in an email Wednesday that he was surprised that Ukraine had not reduced gas and energy transit earlier, in the absence of an energy blockade imposed by Europe.
“Russia is hitting Ukrainian warehouses and fuel supplies on its own, so maybe that’s Ukraine’s answer to that,” he added.
The threat from Russia to cut off natural gas flows to Europe has prompted the European Union to boost demand for alternative suppliers, with Russia accounting for about 40% of all EU natural gas imports.
Economists and traders have warned that a complete energy blockade could have dire consequences for pricing and inflation, with veteran gas trader Bill Perkins telling CNBC in April that such a move could cause “catastrophic pricing” this winter.
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