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Thursday, May 26, 2022

“Gas war” escalates due to cuts “Gazprom” in Eastern Europe

Latest News"Gas war" escalates due to cuts "Gazprom" in Eastern Europe

The gas war between the Kremlin and Europe is expanding on multiple fronts, and bombs continue to devastate Ukraine on the 79th day of the Russian offensive. On the one hand, Kyiv accuses Moscow of forcing a reduction in gas transit to the communal bloc through its territory. On the other hand, the state monopoly Gazprom has sealed the valves of the gas pipeline that feeds Germany through Poland. Yamal Europe and Nord Stream 2, two major projects from when Russia was Europe’s gas reserve, are now just another piece of the landscape. And in parallel, the Kremlin denies that it is going to shut off gas to Finland for joining NATO, while issuing an ultimatum to Moldova, also dependent on Russian gas, to pay off the debts it forgave when it had a pro-Russian government.

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The European Union plans to cut Russian gas imports by two-thirds by the end of the year, but the Kremlin has begun to block the transition, which will not be smooth. The Ukrainian gas transmission system operator (GTSU, the official abbreviation in English) says that Gazprom does not want to supply gas volumes contracted with Europe through its territory. The Soyuz gas pipeline is fed through several connections, but two are key: the Soyranovka station, through which almost a third of the gas passed and which Ukraine closed on May 11 “due to force majeure”; and Sudzha, where all the gas could be redirected, Kyiv reports.

“The technical capacity of Sudzha is 244 million cubic meters of gas per day, which is more than enough to continue deliveries of the contracted volumes,” the State Customs Service said in a statement. So far, about two-thirds of the gas that transits through Ukraine has passed through this station. According to Gazprom, on May 12 and 13, he delivered 50.6 and 61.9 million cubic meters per day, respectively. That is, hardly a quarter of the entire theoretical power of Suji.

These numbers are not insignificant. According to the International Energy Agency, the European Union imported 380 million cubic meters of Russian gas per day through pipelines. That is 45% of the total in 2021.

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“Our meters recorded unauthorized gas intakes in the channel of the Soyuz gas pipeline through the occupied territories,” sources in the State Customs Service explained to EL PAÍS. That is why the operator, “unable to withstand the agreed volumes of traffic,” demanded that Gazprom redirect gas to stations controlled by the people of Kiev. A day after the people of Kiev closed traffic through Soyranovka, Gazprom itself stopped pumping gas there.

Gazprom spokesman Sergei Kupriyanov said earlier that it was “technically impossible” to transfer this gas quota to Sudzha, which is still under Ukrainian control. However, the State Customs Service says that, without changing a single comma of the current contract, this route has contracted a maximum capacity of up to 150 million cubic meters per day, “therefore, the place already reserved for deliveries to Europe is being wasted.”

In addition, current traffic volumes pale in comparison to the capacity that was projected when the pipeline was built before the breakdown of relations between Ukraine and Russia. In 2019, Moscow and Kyiv signed a new five-year contract, according to which Gazprom significantly reduced pumping through this country. However, in 2020, 120 million cubic meters per day passed through Suju, more than double the figures of recent days.

On the other hand, the GTSU has a precedent in its favor that year. In October 2020, the transit from Soyranovka to Sudzha was transferred for repairs. This second station assumed a volume of 165 million cubic meters of gas, which is almost three times more than now.

Gas, pressure weapon

The gas war has many battlefields. This Friday, the Kremlin was quick to deny reports that it was about to cut off supplies to Finland after its prime minister and president backed the Scandinavian nation’s NATO membership. “Gazprom supplies gas to several consumers in Europe, including NATO member countries,” Vladimir Putin’s spokesman Dmitry Peskov recalled after an article in the Finnish media Iltalehti this Thursday in which several MPs warned that his country imports 89% of its gas from Russia and stocks may run out “tomorrow”.

The other front is the pressure that Moldova is under after turning towards the European Union. Maia Sandu, the president of the eastern country, denounced on Wednesday that the Kremlin is demanding that Chisinau pay interest on late payments now, and not when the leaders were in the Kremlin’s orbit. “These debts have been accumulating since 1994. They didn’t ask for their compensation all this time, and now they ask us, and at a time when fuel prices have risen so much. The political approach is obvious,” Sandu lamented.

In October 2021, Russia and Moldova agreed to extend gas supplies to this country for another five years in exchange for debt repayment. Then Gazprom insisted on a temporary cessation of supplies, and Chisinau agreed to audit its obligations by May 1. However, he could not do it in time and asked to be postponed. The Moldovan government claims that the conflict in Ukraine and sanctions against Gazprom have made it difficult to find companies to do the job. The Russian state gas company estimates the main part of the debt at 417 million euros, although it increases it to 683 million with interest.

The press secretary of the President of Russia also addressed this issue. “There is no political overtones here. If the goods are delivered, they must be paid for. There may be some reasonable benefit, but the debt cannot constantly grow, this does not fit into any economic concept,” Peskov warned, although Moldova has already paid its current bills, including for the gas delivered in April.

Other cuts to Europe

The European Commission has urged member states to significantly reduce their purchases of oil and gas from Russia, and the Kremlin has responded to the sanctions by creating a mechanism that forces importers to open accounts with the Russian banking subsidiary Gazprom so that its payments in euros or dollars are exchanged for rubles for Moscow Exchange.

European countries do not want to do this and demand that their contracts be respected in accordance with the letter. In Russia, meanwhile, the confusion is being encouraged by the fact that some companies have already agreed to join the system. This is the case, for example, with the Italian Eni, which later denied this. “The agreed currency is the euro and we will continue to receive invoices in euros. We did not open an account in rubles, ”Francesco Gattei, CFO, told Bloomberg at the end of April.

Poland and Bulgaria became the first countries to which Moscow cut off gas for non-payment, refusing to accept this mechanism. Added to this is the fact that Gazprom canceled deliveries via the Yamal-Europe gas pipeline, which crosses Poland and reaches its final destination, Germany, from this Thursday. The gas company immediately followed orders from the Kremlin, which imposed sanctions on several European companies in response to the West’s crackdown on the Russian economy for attacking Ukraine.

Among the 31 companies that fell under Russian sanctions, there are several companies with the participation of Gazprom in the management of gas pipelines and gas fields in Europe. After moving away from them, as in the case of the Polish EuRoPol Gaz, Moscow decided that no more gas molecules would pass through its infrastructure.

Meanwhile, Europe is also issuing ultimatums to Moscow. “If Gazprom does not fill our largest field, we will take it and give it to other suppliers,” Austrian Chancellor Karl Nehammer said in an interview with the Kronen Zeitung newspaper on Thursday. Germany, for its part, nationalized Gazprom’s German subsidiary in April. After years of Berlin defending the view that Nord Stream 2 is a bridge to peace with Russia, its economic spokeswoman Annika Einhorn confirmed this Thursday that the project, completed in January, is “definitely dead.” “.

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