Russia blocks gas for the first time: the consequences for Europe

As widely expected, after the Ukraine’s decision to close the Russian gas access point in the Donbass last Wednesday, the reaction from Moscow arrived. Russia has decided to stop the gas flows that pass through the Yamal-Europa pipeline in Poland.

The closed transit point from Ukraine handles about 8% of Russian gas flows to Europe, and Kiev has proposed that the flows can be redirected to an alternative transit point in Sudzha.

In 2021, EU countries obtained about 155 billion cubic meters of gas from Russia: a huge figure. And now Europe is at a crossroads: what it is putting in place is greater pressure on Putin to guarantee alternative gas supplies, after Moscow imposed sanctions on the European branches of the Russian energy giant Gazprom and after Kiev closed that important transit route.

I prices have already skyrocketedAt the gas site TTF in the Netherlands they increased 10% on Thursday, with contracts for delivery in July and August trading between 105 euros and 106 euros per megawatt.

What do we know about gas in Poland

The Kremlin’s sights are mainly Gazprom Germany and Europol Gaz, owner of the Polish part of the Yamal-Europe gas pipeline that brings Russian gas to Europe: the pipeline is jointly owned with Gazprom.

Gazprom holds an almost 49% stake in the Polish section of the pipeline. The Yamal pipeline can supply 33 billion cubic meters per year of gas to Poland and Germany. However, Gazprom has been using its capacity erratically for several months, severely limiting supplies since the end of April.

According to Gazprom, Polish sanctions against the gas producer deprived the Russian company of its shareholder status in Europol Gaz since April 26, blocking its voting rights and the possibility of obtaining dividends.

What do we know about gas in Germany

Russian sanctions against Europol Gaz also include Gazprom Germany and its affiliates in what Russia considers “hostile countries” – nations that have imposed sanctions on the country, its companies and individuals in response to the Russian military invasion of Ukraine.

Gazprom Germany operates Germany’s largest gas storage facility, Astora, which is located in Rehden, in the Lower Saxony region. The plant has a capacity of 4 billion cubic meters.

However, the German Bundesnetzagentur authority which now has control over it found that the storage facilities were nearly empty as early as April.

Kremlin spokesman Dmitry Peskov said there can be no relations with companies that have imposed sanctions nor can they take part in the supply of Russian gas. The Russian news agency Interfax claimed that the sanctions concern 29 Gazprom subsidiaries based in Belgium, Bulgaria, France, Hungary, Luxembourg, the Netherlands, Romania, Singapore, Switzerland, the United Kingdom and the United States.

Only Nord Stream remains

Coupled with the loss of a third of its transit capacity through Ukraine earlier this week, Gazprom now has only one gas pipeline for northern Europe still in operation: the Nord Stream connection with a capacity of 55 billion cubic meters per year.

Nord Stream has served both Germany and Poland since April, while the Yamal pipeline operates in the reverse direction to transport gas from Germany to Poland.

EU allocates another 500 million euros for arms to Ukraine

We are probably facing a turning point for the Russian-Ukrainian conflict, with the European Union which has decided to allocate another 500 million euros for arms and other military equipment to Ukraine. To anticipate it was the EU foreign policy chief Josep Borrell at the G7 summit in Germany. This increases the financial assistance that Brussels has provided to Kiev to 2 billion euros.

Even before the start of the summit, Borrell had noted that “the war continues” and as the G7 “we will provide Ukraine with the weapons it needs. We will provide weapons, tanks, heavy artillery, ammunition… the things they need ”. But he also said that Europe will continue to work for Russia’s international isolation.

As for energy dependence on Moscow, Borrell explained that “it takes an agreement and political impetus” to “free us from the dependence on Russian gas”. Foreign ministers will provide further impetus in this direction next Monday at their meeting in Brussels. Because “even if we understand all the needs of the member countries, we need an agreement” he concludes.

How long can the war last?

To date, at least 26,900 Russian soldiers have been killed in Ukraine since the beginning of the war on 24 February. The data was released by the Kiev Ministry of Defense in its latest bulletin, noting that 1,205 Russian tanks and 2,900 armored vehicles were destroyed in the fighting. On the other hand, 13 Russian warships were destroyed by the Kiev military, according to reports from the Ukrainian General Staff.

Meanwhile, Ukraine has already spent about 8.25 billion dollars on the warexplained Ukrainian Finance Minister Serhiy Marchenko.

All this means that the conflict, limiting ourselves here to a material point of view, is not sustainable for much longer. How long can it last? A few weeks? Maximum summer?

The fundamental role of Draghi

In this scenario Mario Draghi is undoubtedly playing a fundamental game. The premier, who flew to the US to meet with President Joe Biden, said he was confident that Moscow’s demand that European buyers pay for Russian gas in rubles will not lead to a disruption of supplies.

The European Commission has warned that compliance with the Russian scheme could violate EU sanctions, but Draghi said it is a “gray zone” without any official decision on the matter. “There is no official statement on what it means to violate sanctions, no one has ever said anything about whether payments in rubles violate the sanctions or not, how these payments are organized, so it’s such a gray area here,” he said. . Moreover, he specified, “Most of the gas importers have already opened their rubles accounts with Gazprom”.

Italy depends on Russia for 40% of its gas imports. Now he is trying to find alternative suppliers, so much so that Draghi he called for a “Marshall Plan” for our country.

Draghi in Washington urged everyone to sit around a table. Even if – and few expected it – the American mission of “Super Mario” was much less aligned than expected from one of the most aligned European premieres in the Atlantic sense (we talked about what Draghi and Biden said to each other here).

Meanwhile, the EU is developing its own emergency plan in the event of an abrupt gas outage by Russia, which will be made official on 18 May. What is already known is that it will focus on rationing of consumption, solidarity between the EU countries affected, gas price ceiling and interventions against speculation.

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