Gas cutoff rattles EU, at little cost to Russia
Putin seemingly aims to subvert European unity
– Cutting off natural gas to Poland and Bulgaria cost Russian President Vladimir Putin very little – but it is adding stress on European countries wrestling over how to reduce energy imports that are feeding the Kremlin’s war chest and how to keep a united front on the war in Ukraine.
European Union officials say yielding to Putin’s demand to pay for gas in rubles would violate Western sanctions imposed over the invasion. Poland and Bulgaria were cut off after refusing the demand and say they will manage because they were already working to end their dependence on Russian energy supplies.
Analysts say there is enough ambiguity in the European stance to let the Kremlin continue its efforts to undermine unity among the 27 member countries – even if an implied threat to cut off major customers such as Germany and Italy may turn out to be an empty one because it would cost Russia heavily.
The cutoff sent a chill through EU officials wondering how their utility companies will heat homes and generate electricity next winter. Putin got maximum disruption of what he regards as a hostile alliance for minimal costs because Poland and Bulgaria are relatively minor customers who were about to end their contracts at year’s end anyway.
Poland’s entire gas import was only 10 billion cubic meters per year, out of total European imports of 155 billion from Russia. Gas in roughly that
amount is already flowing to Poland from other European countries pitching in to help.
Russian energy giant Gazprom has lost relatively little revenue.
“He wants to fragment European countries and their stance toward energy diversification and the overall stance against Russia,” said Simone Tagliapietra, an energy expert and senior fellow at the Bruegel think tank in Brussels.
European payments for oil and gas amount to $850 million a day even as governments condemn the war. While Europe needs the oil and gas, those sales are the main pillar of the Kremlin’s budget.
A wide-ranging gas cutoff would hit industrial users that can’t easily substitute other energy sources. Liberty Ostrava steel works in the Czech Republic has “no short-term solution to replace natural gas” because a changeover would take nine to 12 months, SPOKESBRUSSELS
woman Barbora Cerna Dvorakova said.
European Union countries or companies bowing to the terms of a Russian presidential decree that insists they pay their gas bills in rubles will be in breach of the bloc’s sanctions, senior EU officials said Thursday. Around 97% of European gas contracts with Russia are in euros or dollars.
Under Putin’s new payment system, the Kremlin has said importers would have to establish an account in dollars or euros at Russia’s third-largest bank, Gazprombank, then a second account in rubles. The importer would pay the gas bill in euros or dollars and direct the bank to exchange the money for rubles.
The sanctions violation essentially comes with the use of the second bank account because the ruble conversion constitutes a transaction involving Russia’s sanctioned central bank.