Saturday, June 25, 2022

Russia’s energy giant halts supply of gas to Poland, Bulgaria

Russian energy giant Gazprom says it has halted gas exports to Poland and Bulgaria over the countries’ refusal to pay for supplies in roubles.

The firm said services will not be restored until payments are made in the Russian currency.

It comes after Russian President Vladimir Putin ordered “unfriendly” countries to pay for gas in roubles.

Poland confirmed supplies had stopped, but Bulgaria said it was still unclear whether supplies had been halted.

Poland’s deputy foreign minister said the country could cope without Gazprom’s gas and had “taken some decisions many years ago to prepare for such a situation”.

Marcin Przdacz told the BBC there were “options to get the gas from other partners,” including the US and gulf nations.

Polish state gas company PGNiG, which bought 53% of its gas imports from Gazprom in the first quarter of this year, confirmed that supplies to the country had been halted.

It described the suspension as a breach of contract, adding that the company would take steps to reinstate the gas supply.

Meanwhile in Sofia, energy minister Alexander Nikolov said Bulgaria had paid for Russian gas deliveries for April and claimed supplier Gazprom will be in breach of its current contract if it halts the flow.

“Because all trade and legal obligations are being observed, it is clear that at the moment [Russian] natural gas is being used more as a political and economic weapon in the current war,”  Nikolov said.

Bulgaria, which relies on Gazprom for more than 90% of its gas supply, said it had taken steps to find alternative sources but no restrictions on gas consumption were currently required.

The executive director of Bulgarian gas network operator Bulgartransgaz said supplies to Bulgaria were still currently flowing and Sofia has said it will continue to follow the EU’s position and pay for its supplies in euros.

Bulgaria also transports Russian gas via an extension of the Turk Stream pipeline to neighbouring Serbia and from there to Hungary. Hungary and Austria also said gas supplies were normal.

Russia’s top lawmaker said on Wednesday that gas giant Gazprom had made the right decision in suspending gas supplies to Bulgaria and Poland and said Moscow should do the same with other “unfriendly” countries.

“The same should be done with regard to other countries that are unfriendly to us,” Vyacheslav Volodin, the speaker of Russia’s lower house of parliament, the Duma, wrote on his Telegram channel.

UK Deputy Prime Minister Dominic Raab earlier told Sky News the decision to cut off gas supplies will have “a very damaging effect on Russia,” adding that such moves could lead to the country becoming “an economic pariah”.

Following Russia’s announcement, Poland’s climate ministry said the country’s energy supplies were secure.

Climate Minister Anna Moskwa said there was no need to draw gas from reserves and gas to customers would not be cut.

Przydacz said his country had been preparing for the possibility Russia might limit gas exports by diversifying its supplies.

“I’m pretty sure that we will manage to handle this,” he told the BBC.

He added that the suspension proved Moscow was “not a reliable partner in any kind of business” and urged other European nations like Germany to support a ban on Russian energy imports.

Poland was already planning to stop importing Russian gas by the end of the year, when its long-term supply contract with Gazprom expires.

PGNiG said its underground gas storage was almost 80% full and, with summer approaching, demand was lower.

Poland also has alternative supply sources, including a liquefied natural gas (LNG) terminal in Swinoujscie.

On 1 May, a new gas pipeline connection with Lithuania is also due to open that will give Poland access to gas from Lithuania’s LNG terminal.

And a new pipeline delivering gas from Norway, known as the “Baltic Pipe”, comes online in October. It should reach full capacity by the end of the year and could replace all Russian deliveries.

The gas supply cut does not mean Poland will immediately be unable to meet customer demand.

In recent years, Poland has reduced its dependence on Russian gas and it now buys LNG from Qatar and pipelines connect the country to the European market. Plus, the winter heating season is over, so demand is lower.

But Gazprom supplies more than half of all Poland’s gas imports. That’s a big hole to fill.

And Poland is not the only EU country now seeking to stop buying Russian energy.

There’s a lot of competition on an already tight gas supply market. When the heating season starts again in the autumn and demand rises, Poland could face a tricky few months securing enough supply.

And if it does so, it may have to restrict supplies to large industrial users.

Supplies from Russia account for about 40% of the EU’s natural gas imports.

However, many countries have pledged to move away from Russian energy in response to its invasion of Ukraine.

The US has declared a complete ban on Russian oil, gas and coal imports.

Meanwhile, the UK is to phase out Russian oil by the end of the year, with gas to follow as soon as possible, and the EU is reducing gas imports by two-thirds.

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