Kremlin denies restricting gas supplies to Europe for political gain
The Kremlin has denied using Russia’s gas resources to turn the screw on Europe, after gas in a pipeline to Germany switched direction to flow eastwards for a second day, keeping prices near record highs as midwinter approaches.
Flows through the Yamal-Europe pipeline to Germany declined over the weekend before stopping on Tuesday and reversing, data from the network operator Gascade showed.
Gazprom, the Russian state gas firm, said the supply was flowing to Russia instead because of cold weather and high demand there.
The supply squeeze came as Mario Draghi, the Italian prime minister, called for urgent action to counter rocketing fuel costs. He said companies profiting from the crisis should contribute to efforts to curb higher bills for households and businesses.
“There are big producers and sellers of energy that are having fantastic profits. They will need to participate to support the economy, they too need to help families,” Draghi said in Rome.
The front-month wholesale Dutch gas price, the benchmark for European prices, rose more than 20% on Tuesday to close at a record high of €181 per megawatt hour (MWh). The equivalent British gas contract also jumped by about 20% on Tuesday, to hit a new peak at £4.51 per therm, up from around 51p a year ago.
Prices dipped on Wednesday but remained high. The price of gas for delivery in Europe next month fell 3% to €175 per MWh, and the British front-month contract eased to £4.17 per therm.
Some analysts and European politicians have suggested Moscow is deliberately suppressing gas deliveries to shore up its political position amid tensions over Ukraine and delays in European certification of another pipeline, Nord Stream 2.
The Kremlin denied using such tactics. “There is absolutely no connection [to Nord Stream 2], this is a purely commercial situation,” a spokesperson said.
The German power suppliers RWE and Uniper, both among the largest customers of Gazprom, said the state firm was meeting its delivery obligations.
Gazprom has previously said it is meeting all long-term contracts with its European customers
The pipeline reversal has added to other pressures that have kept gas prices high for much of 2021, with knock-on effects that have included a raft of UK energy suppliers going bust.
In a sign of growing anxiety about the impact of soaring gas and electricity costs, Bulgaria’s government approved on Wednesday an $867m scheme to help businesses through the winter. The measures will include compensation for power distribution companies and heating utilities to try to head off a leap in household energy bills.
Underlying factors fuelling the fresh spikes in gas prices include colder weather and strong power station demand, with some French nuclear plants closed to address safety concerns.
Also, wind speeds have been slower than usual in Europe, meaning turbines have generated less electricity than hoped for.
Ships carrying liquefied natural gas bound for Asia have been turning around to supply European consumers willing to pay a large premium amid price spikes, the Financial Times reported this week.