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Russia threatens to cut off gas from Europe through Ukraine

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CNN Business

Europe is bracing for further cuts in Russian natural gas supplies as Moscow threatens to cut off flows to Moldova, the country on Ukraine’s southwestern border.

Russian gas giant Gazprom said on Tuesday that Shipments to the country will be reduced from Monday due to disputed allegations that Ukraine is withholding some of the gas because it is routed through its territory.

The company said on its official Telegram account that it would cut gas flows through the Sudzha crossing, an amount equal to the amount it claims Ukraine is blocking from reaching Moldova.

The volume of gas supplied by Gazprom

(GZPFY) for GIS Sudzha for transiting Moldova through the territory of Ukraine exceeds the physical volume transported to the border of Ukraine with Moldova.

Ukraine denied preventing the gas from reaching its neighbor. Ukrainian energy company Naftogaz said on Tuesday Loudspeaker Gazprom accused Ukraine of stealing gas. once again. In short: this is not true.

The Gas Transmission System Operator of Ukraine (GTSOU) said in a statement that all Russian gas was received at the Sudzha entry point for transit to Moldova. had been moved outside points along their common boundary.

The company said Moldova had begun “effectively reversing” some of its Russian gas imports to Ukraine, though it did not give a reason.

Analysts said such a reversal is a joint commercial arrangement whereby some of the gas destined for a particular site is diverted to storage or sold to another buyer.

This is not the first time that Russia has used gas as a tool of political pressure. “He manipulates the facts to justify his decision to further limit the volume of gas supplies to European countries,” said Olga Belkova, director of government and international affairs at GTSOU.

Henning Gloystein, Eurasia Group’s director of energy, climate and resources, told CNN Business that Moldova “stored some of its gas in Ukraine in the past … so the argument that Ukraine was keeping it in Ukraine is irrelevant.”

Moldova is not a member of the European Union, although it is in the process of applying to become a member.

Data from independent commodity intelligence shows that Russia supplies Moldova with about 5 million cubic meters of gas per day, a tiny fraction of the gas the EU uses every day to power its homes and businesses.

But the move raises the specter of a further reduction in gas supplies to the EU via Ukraine, one of only two routes Russia still delivers gas to the EU. Russia also sends gas to Europe via the TurkStream gas pipeline, which crosses Turkey into Bulgaria.

Kateryna Filippenko, chief global gas markets analyst at Wood Mackenzie, a consulting firm, told CNN Business, referring to the Nord Stream 1 gas pipeline shutdown over the summer.

In June, Gazprom reduced production on the vital pipeline to 40% of capacity. By September, the lack of gas was ever leaking.

“The risk of it entering Ukraine is really great,” Filippenko said, adding that she expects a complete lockdown before the end of the year.

Natural gas prices in Europe rose 4% on Wednesday, but at €124 ($128) per megawatt-hour they are still 64% below the record highs they reached earlier this year.

If Russia stops its exports through Ukraine, Europe will lose about 4 billion cubic meters of gas, or only 1% of its estimated gas demand for 2022. Between December and March, Filippenko said.

Even if that happens, Europe should be fine, at least in the short term. Gas storage facilities on the continent are about 95% full, according to data from Gas Infrastructure Europe. This is due to a concerted effort by EU member states during the summer to stock up before the colder months, and increased imports from alternative and LNG suppliers.

The mild European climate at the beginning of winter made it possible to limit the amount of gas extracted from these deposits.

In this context, Filippenko said that the complete closure of the gas pipeline leading to Moscow through Ukraine will cause “minor” damage.

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