European officials condemned the move, which threatens the continent’s energy supply, as blackmail by Russia.
Natural gas prices in Europe rose 3.1% to €106.42, equivalent to $112.83 a megawatt-hour after jumping more than 20% on Wednesday, as traders braced for already tight supplies. The risk was weighed. They remain around half their peak in March, but well above their levels a year ago, representing a major source of inflationary pressures on Europe’s fragile economies.
Russian President Vladimir Putin last month demanded that countries deemed hostile to EU members such as Moscow pay in rubles for Russian gas. Most European countries have condemned the demand and stick to their previous method of paying for gas from Russia. Gas contracts are usually denominated in dollars or euros.
Russian energy giant Gazprom PJSC said on Wednesday that it had “stopped supplies to Bulgaria and Poland due to non-payment in rubles.” Bulgaria and Poland said the move was a breach of contracts. Other large European gas consumers such as Germany and Italy have not been affected so far.
European officials and analysts see Moscow’s move as a way to put further pressure on Europe, which took about 40% of its gas from Russia before the war in Ukraine. With the demand for payments in rubles, the Kremlin also wants to strengthen its troubled currency and force Europe to remain connected to its domestic banking system, which has otherwise been cut off from much of the world by Western sanctions.
“Gazprom’s announcement is another attempt by Russia to blackmail us with gas,” European Commission President Ursula von der Leyen said.
Analysts at the energy consulting firm Rystad said that “Russia has fired the first shots in the West,” using energy as a weapon.
“Poland and Bulgaria simultaneously losing access to Russian gas has not had a major impact on the overall European market, but is likely to have more serious consequences if other large countries or individual buyers are being cut off, such as Germany and Italy. Rystad wrote. A note to customers. “This action by Russia should be seen as a precedent.”
“Russia is trying to break the unity of our allies,” Ukrainian President Volodymyr Zelensky’s chief of staff, Andrey Yermak, said on Telegram.
Russian State Duma President Vyacheslav Volodin said on Wednesday that Moscow should expand measures against other unfriendly countries in a possible foreshadowing of how the gas situation could escalate.
Following Moscow’s invasion of Ukraine, Berlin is racing to reduce its reliance on Russian gas. Chancellor Olaf Scholz’s government is trying to limit this dependence by accelerating investment in renewable energy and building liquefied natural-gas terminals, but has so far rejected a full Russian-gas embargo amid fears of economic consequences. Have given.
Germany has bet that Russia will not cut it. Russia has few options to sell most of its gas elsewhere, with most of its pipeline capacity oriented to Europe. Pipelines to China are already running at capacity, while new pipelines will take years to build.
EU member states are also discussing an oil embargo on Russia or other measures to reduce its revenue from selling oil to the bloc as part of a sixth round of sanctions since the invasion of Ukraine. The European Commission is likely to make a proposal next week, although several member states, including Hungary and Germany, have so far opposed an immediate oil-buying ban.
“The question is, who is more resilient?” Ukrainians are paying with their lives, we are paying with higher energy prices.”
According to analysts, in the event of a complete shutdown of Russian gas flows, European countries such as Germany will need to ration energy and close factories. The country’s leading economic think tank said in a group report in early April that Germany would enter a sharp recession if Russian natural-gas deliveries were halted.
Earlier in April, the German government temporarily took control of a local Gazprom unit to ensure that the gas flow would continue.
A spokesman for Germany’s Federal Network Agency said the security of supplies in Germany is currently being guaranteed. “We are monitoring the situation very closely,” the spokesman said.
Russia’s gas stoppage would have a limited impact on Poland, which was already set to become independent from Russian gas by the end of this year. Still, Poland had to take at least 5 billion cubic meters of gas from Gazprom, which would be unlikely and would need to be replaced this summer, said James Huckstep, head of EMEA gas analytics at S&P Global Commodity Insights. , He said most of the gas would be pumped across the border from Germany.
That’s a huge deal for Bulgaria, which gets more than three-quarters of its gas from Russia and has few immediate options to easily replace it. A new pipeline to Greece through which Bulgaria plans to import gas from Azerbaijan has faced long delays and is yet to be completed, said Tom Marjek-Mansar, head of gas analytics at ICIS. said. Using complex swap arrangements, Bulgaria could divert some of its Russian gas through existing pipes to Greece, he said.
Bulgaria’s Energy Minister Alexander Nikolov said on Wednesday that the country has enough gas in storage for the coming month and was looking for alternative deliveries.
“As all trade and legal obligations are being complied with, it is clear that natural gas is being overused as a political and economic weapon in the current war,” Mr. Nikolov said.
Bulgaria’s ruling coalition is divided over the issue of sending arms to Ukraine, and analysts say the halting of gas supplies may be an attempt by Moscow to pressure Sofia not to send military support. A delegation led by Bulgarian Prime Minister Kirill Petkov is visiting Kyiv this week.
Moscow has long used gas to achieve its geopolitical goals. Last fall, Russia halted deliveries to Europe from the short-term gas spot market despite global shortages. This kept the level of controlled storage sites across the continent at a low level, which helped propel prices to record highs. European lawmakers called for an investigation into Russia’s manipulation of the market. Mr Putin at the time dismissed the Kremlin’s use of energy as a weapon as a “politically motivated stigma”.
Martin Vladimirov, director of the energy and climate program in Sofia at the Bulgaria-based think tank Center for the Study of Democracy, said Wednesday that Moscow’s move shows it will take advantage of Europe’s gas dependence to continue pressing on the continent.
“The Kremlin playbook continues to undermine Europe’s unity on energy security and diversification,” said Mr. Vladimirov.
—Lawrence Norman contributed to this article.