It’s day 63 of Putin’s 3-day war and European gas prices have just risen again today by as much as 20 per cent after Russia’s Gazprom suspended supplies to Poland and Bulgaria.
Gazprom says these two countries have failed to make rouble payments that were due a day earlier.
Europe’s wholesale gas price gained about 20 per cent on the futures markets, before moving back again to trade 8 per cent higher at €106 per megawatt-hour. It means that gas prices are now more than six times higher than a year ago. The euro, which has declined steadily since February, fell to a five-year low against the dollar on Wednesday. It’s a seemingly never-ending cycle of bad news as the world struggles with the impact of the pandemic and war in Europe.
The FT reports that – Gazprom has completely suspended gas supplies to Bulgargaz (Bulgaria) and PGNiG (Poland) due to non-payment in roubles.” Ursula von der Leyen, European Commission president, accused Russia of attempting to use gas as “an instrument of blackmail” after Gazprom’s decision to suspend deliveries. In a statement, she called its action “unjustified and unacceptable” and said it pointed to Russia being an unreliable gas supplier. Von der Leyen said the EU was prepared for the scenario, however, as tensions rise between Russia and the West over its invasion of Ukraine. The EU had been working to ensure alternative deliveries and the “best possible” gas storage levels, she added.
However, Europe does depend on Russia for more than a third of its gas requirements and Gazprom holds something of a monopoly on pipeline gas supplies in Russia.
Germany needs about 40 per cent of its imported gas from Russia and said it was continuing to receive Russian gas unimpeded. “Germany’s security of supply is currently assured,” a spokesman for the Federal Network Agency, the regulator that oversees Germany’s energy infrastructure. The German economy ministry said “for the time being we have not identified any shortages” – the FT reported.
“But we are concerned that there has been a shut-off in supply to our European partners. We are coordinating closely within the European Union to form an overview of the situation. The relevant bodies are currently meeting.”
As Putin gets bogged down in the war in Ukraine and suffers the type of international responses deserving of a despot using ‘blood oil’ to lever a position – it demonstrates nothing other than his ability to threaten neighbours and tear up the norms of international agreements.
Poland’s prime minister, Mateusz Morawiecki accused Russia of “gas imperialism” after Gazprom cut off supplies but insisted that the nation would be able to cope without Russian hydrocarbons.
Poland imported 45 per cent of its gas from Russia in 2020 under a long-term contract with Gazprom, which expires at the end of this year. But unlike Germany or many European countries, Poland made the right call some time ago and spent the past few years investing in infrastructure that will allow it to make do without Russian gas.
Poland and Bulgaria’s contracts with Gazprom make up about 8 per cent of EU imports from Russia last year, according to ICIS, a commodity analysis firm.