Russia cuts gas supplies to Europe
Gazprom raises stakes in sanctions war after EU move to embargo most Russian oil imports and companies miss deadline to pay in roubles
Russia has further cut off gas supplies to Europe, after state energy giant Gazprom turned off the taps to a top Dutch trader and halted flows to some companies in Denmark and Germany.
The intensification of the economic battle on Tuesday over Russia’s invasion of Ukraine follows the EU’s overnight decision to place an embargo on most Russian oil imports as part of its financial sanctions against the Kremlin.
EU leaders said the ban would immediately impact 75% of Russian oil imports, rising to 90% by the end of the year.
Gazprom extended its gas cuts on Tuesday by stopping supply to GasTerra, which buys and trades gas on behalf of the Dutch government.
It later said it would also cut off gas flows to the Danish energy firm Ørsted and to Shell Energy for its contract to supply gas to Germany, after both companies failed to make payments in roubles.
GasTerra said it had found contracts elsewhere for the supply of the 2bn cubic metres of gas it had been expecting to receive from Gazprom between now and October.
Ahead of the late-night talks in Brussels, Denmark had signalled it expected its Russian gas supply to end. However, Ørsted said on Monday that a gas cut would not immediately put the country’s gas supplies at risk.
Moscow has already halted supplies of natural gas to Bulgaria, Poland and Finland, after they refused to pay in Russian roubles.
Gazprom said it had been told by Shell Energy Europe Limited that it would not pay in roubles for gas supplied to Germany. It added that the contract stipulated gas supplies of up to 1.2bn cubic metres per year.
Gazprom said Shell and Ørsted had failed to pay for gas deliveries by the end of the working day on May 31, and would stop deliveries until they paid in line with Russian demands.
The EU’s energy commissioner had previously said that member states would have to reject Moscow’s demands, as the mechanism set out by Russia would have breached the bloc’s sanctions, even if this left them without alternative gas supply.
The Kremlin had demanded payments for exports in roubles earlier in the spring, after the country’s currency fell off a cliff after the invasion of Ukraine and Russia was excluded from the Swift international bank messaging system in earlier rounds of sanctions.
Supply cuts have pushed already high gas prices even higher, contributing to soaring inflation, and also putting pressure on European governments and companies to find alternative supplies and infrastructure, including storage facilities.
The EU has faced criticism over the past weeks for not going far enough in its sanctions against Russia. Ahead of Monday’s summit in Brussels, Ukraine’s president, Volodymyr Zelenskiy, appealed to EU leaders to show unity against Vladimir Putin.
Under a compromise plan from the summit, Russian oil transported through the Soviet-era Druzhba pipeline for use by Hungary, the Czech Republic and Slovakia would be exempt from the EU embargo.
Despite this agreement, Estonia’s prime minister has called on the EU to go further and work on a seventh round of sanctions against Russia, which would include restrictions on gas imports.
However, Kaja Kallas said she was not confident this would happen. “I think that gas has to be in the seventh package but I am realistic as well,” Kallas told reporters as she arrived for a second day of talks in Brussels. “I don’t think it will be there.”
