Breaking contract, Russia turns off gas for Bulgaria, Poland

Russian gas monopoly Gazprom said on April 27 Gazprom Export has fully halted gas supplies to Bulgaria’s Bulgargaz and Poland’s PGNiG until the payments are… Read More »

Breaking contract, Russia turns off gas for Bulgaria, Poland

Russian gas monopoly Gazprom said on April 27 Gazprom Export has fully halted gas supplies to Bulgaria’s Bulgargaz and Poland’s PGNiG until the payments are made in rubles.

“As of the end of the working day on April 26, Gazprom Export did not yet receive from Bulgaria’s Bulgargaz and Poland’s PGNiG payments for the gas supplied in April, which were to be made in rubles,” Gazprom said in a press release. “Bulgaria and Poland are transit states. In case of unauthorized offtake of Russian gas from the volumes intended for transit into third countries, the transited supplies will be reduced by the volume that was offtaken,” Gazprom warned.

PGNiG said although the Polish company has duly met all its obligations under the Yamal contract, on April 27 Gazprom halted natural gas supplies it is obliged to deliver according to the contract and PGNiG’s nominations. PGNiG said it considers the halt of natural gas supplies a breach of the Yamal contract and reserves the right to raise claims in connection with the halt and will use all of its contractual rights and rights under applicable provisions of law.

Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies, told New Europe on April 27 Gazprom’s actions shows that Russia is not bluffing. Russian President Vladimir Putin had said gas sales to “unfriendly” countries to Moscow would have to be paid in rubles.

“I understand Russian gas supplies to Poland and Bulgaria have been suspended because of their refusal to pay for April supplies in line with the new payment mechanism, established by the presidential decree of 31 March 2022. The decree prohibits Gazprom from supplying gas if payment for gas delivered from the 1st of April onwards is not made in line with the new procedure unless a derogation was applied for and granted by the Russian government allowing to pay in line with the old mechanism,” Yafimava explained. “I think this action has demonstrated that Russia is not bluffing. It has sent a strong signal that if any other buyer – big or small – decides to reject the new procedure out of hand its supplies would be suspended as well unless a derogation is granted,” she added.

According to the Oxford energy expert, the European Commission guidance said the first stage of the new payment procedure – opening a euro account in Gazprombank – is not in conflict with the EU sanctions regime. It also said that the second stage – conversion of these euros into rubles and a transfer to Gazprom’s account by Gazprombank – could potentially be in conflict with the sanctions regime but did not pass a judgement on whether it actually is in conflict, leaving it to member states governments and buyers to decide on whether to follow the new procedure, to reject it or seek a derogation, Yafimava said. “Should all buyers – including the biggest markets – decide to reject the new procedure, they could see their supplies being suspended over the coming weeks. Should this suspension last throughout summer one could see Europe entering the next winter with almost no gas in storages,” Yafimava said.

European Commission President Ursula von der Leyen said Gazprom’s announcement that it is unilaterally stopping gas delivery to certain EU Member States is another provocation from the Kremlin. “But it comes as no surprise that the Kremlin uses fossil fuels to try to blackmail us. This is something the European Commission has been preparing for, in close coordination and solidarity with Member States and international partners. Our response will be immediate, united and coordinated,” von der Leyen said.

The first priority for the EU is to ensure that Gazprom’s decision has the least possible impact on European consumers. “Today, Member States met in the Gas Coordination Group. Poland and Bulgaria updated us on the situation. Both Poland and Bulgaria are now receiving gas from their EU neighbours,” she said, adding that this shows first of all the immense solidarity among us but it also shows the effectiveness of past investments, for example in interconnectors and other gas infrastructure. The EU Commission will also intensify its work with the so-called regional groups of Member States, that can provide the most immediate solidarity to each other. This will mitigate any impacts on possible gas disruptions, the Commission President said.

Secondly, the EU will continue our work to ensure sufficient gas supply and storage in the medium term. “Our action plan REPowerEU will help to significantly reduce our dependency on Russian fossil fuels already this year,” von der Leyen said. She reminded that the EU also reached an agreement with the US to provide additional liquified natural gas (LNG) imports this year and the following ones. “And we are working hand in hand with our Member States to secure alternative gas supply from other partners, too. In the longer term, REPowerEU will also help us move to a more reliable, secure and sustainable energy supply. We will present our plans to speed up the green transition in mid-May. Every euro we invest in renewables and energy efficiency is a down payment on our future energy independence,” von der Leyen said.

“This latest aggressive move by Russia is another reminder that we need to work with reliable partners and build our energy independence. The Commission is in contact with the French Presidency. And I welcome their plans to convene a meeting of EU Energy Ministers as soon as possible,” von der Leyen said, adding, “Today, the Kremlin failed once again in this attempt to sow division between Europeans. The era of Russian fossil fuels in Europe will come to an end. Europe is moving forward on energy issues”.

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