Tue, October 04, 2022

Gazprom ceases gas supply to Poland and Bulgaria

gas

On Wednesday, Russia’s Gazprom halted gas supplies to Poland and Bulgaria for failing to pay for gas in rubles.

This move reflects Moscow’s toughest response to the crippling sanctions imposed by the West for the invasion of Ukraine.

The world’s biggest natural gas company supplies around 40.00% of European energy products. It warned that it would further cut the transit via Poland and Bulgaria if countries siphoned off the gas illegally.

Russian President Vladimir Putin casts the deterrents as an act of economic war. As a result, he demanded ruble payments for gas.

Nevertheless, most companies had initially rejected the scheme. For instance, Poland has repeatedly emphasized that it will not pay for Russian gas in rubles. Then, the state has planned not to extend its gas contract with Gazprom after it expires at the end of this year.

Similarly, Bulgaria, heavily reliant on Russian gas, echoed the same sentiments. The country said it would not hold talks with Gazprom to renew its natural gas purchase deal.

Cutting off supplies to Warsaw and Sofia is one of Moscow’s most significant steps in the gas market. It is a decisive break with the country’s previous insistence that it is a reliable energy supplier.

Accordingly, the Soviets built gas pipelines to Europe from Siberia in the early 1970s. Thus, Europe’s biggest economies are notably dependent on the Kremlin gas. The state sought for five decades to cast itself as a well-grounded energy supplier.

In the past 15 years, Russia and Ukraine have argued over pricing, resulting in disruptions to supply.

Eventually, Moscow’s supply disruptions rippled across Europe from the winter of 2008 to 2009. The country also slashed supplies to Kyiv in 2014 after Russia annexed Crimea.

In line with this, analysts now expected that Gazprom’s halt to supply would expand to other countries.

Gazprom’s halt pushes European gas prices

Correspondingly, benchmark prices for natural gas in Europe ticked higher today amid the supply halt by Gazprom.

The Dutch TTF Natural Gas Futures contract for May delivery soared 3.68% or 4.28 points to $113.60 per megawatt-hour. The contract had jumped over 10.00% on Tuesday as the Kremlin first stated its intention.

The European Commission cited the announcement by Gazprom as another attempt by Russia to use gas to blackmail.

Experts noted that the move was a breach of contract as Bulgaria already paid in full for its supplies in April.

Meanwhile, Germany, largely reliant on Moscow gas, has enacted the first part of a three-part plan to conserve energy supplies. The final stage of its scheme aims rationing in the industry.

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