A gamble by Kremlin-backed Gazprom to “blackmail” Europe into paying for gas in rubles shook markets but may have backfired, as Brussels vowed to end its Russian energy dependency.
Benchmark prices for Dutch TTF gas futures surged well over 20% after Gazprom said it would cut Poland and Bulgaria off, warning other European countries they, too, could be affected if they tried to help.
The stunt was all the excuse EU Commission President Ursula von der Leyen needed to justify her decision last month to strike new import deals for liquefied natural gas (LNG) from reliable allies including the United States.
“It comes as no surprise that the Kremlin uses fossil fuels to try to blackmail us,” she told reporters on Wednesday. “But Russia is only hurting itself.”
Analysts at market research firm Rystad Energy agreed, expecting Gazprom customers will view the Russian state-controlled firm as constituting a unilateral breach.
“This will erode any role (if any) Gazprom may hope to have in the postwar energy system of Europe and may see them tied up in years of disputes,” it wrote in a research note.
Poland said it could weather the storm thanks to gas storage levels at roughly 80%, nearly twice as high as typical seasonal levels. The country, which historically fosters a deep suspicion of Russia, had the foresight to steadily reduce its dependency over the past few years.
Whereas neighboring Germany is only now trying to set up LNG terminals, Poland has been ramping up shipments arriving at its terminal on the Baltic Sea coast and preparing the ground for imports by pipeline from Norway.
Warsaw believes it would have been even better prepared had its current Yamal contract not locked it in to a minimum amount of gas deliveries under a “take or pay” arrangement.
“We planned to cut ourselves off from Russian [gas] supplies at the end of December with the end of the Yamal contract,” said Piotr Naimski, responsible for energy security in the country. “The Russians are accelerating this. We will cope.”
More sanctions on their way
While Bulgaria is more dependent on Russia, it, too, said it would not buckle under.
“Bulgaria will not negotiate under pressure and with its head bowed,” said Energy Minister Alexander Nikolov. “Natural gas supplies cannot be guaranteed, but this does not mean that Bulgaria will not be able to cope in this situation as well.”
The move coincides with ever more strident rhetoric out of Moscow, where government officials and state run media outlets are increasingly framing the fighting in the Donbas as little more than a proxy war with NATO occurring on Ukrainian battlefields.
Gazprom warned, for example, that should any Russian supplies meant to be transiting through Poland and Bulgaria en route to other destinations be diverted to those countries, it would immediately respond with a corresponding drop in export volumes.
Rystad Energy said Gazprom’s decision to impose an embargo on the two EU members “rattled the cages of gas markets,” but argued it vindicated Warsaw’s move to diversify supply: “Poland will not need to cut supplies to consumers.”
Von der Leyen meanwhile warned Moscow it could expect further reprisals as the 27-member bloc was hard at work on a sixth package of sanctions—purported to include an embargo of Russian crude oil.
“Today the Kremlin failed once again in its attempt to sow division among member states,” von der Leyen said. “The era of Russian fossil fuels in Europe is coming to an end.”
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