Russia has imposed a partial gas embargo against the European Union – ExpertRU

The Government of the Russian Federation adopted a resolution the day before, which deals with measures to implement the Decree of the President of the Russian Federation Vladimir Putin “On the application of retaliatory special economic measures in connection with the unfriendly actions of some unfriendly states and international organizations.”

This document has become the cornerstone for the implementation of Russian counter-sanctions in the energy sector. In particular, the Decree prescribes not only to prohibit all foreign trade transactions with organizations included in the list of legal entities against which special economic measures are applied, but also to stop supplying them with raw materials mined in Russia.

“Daughters” were left without a dowry

In pursuance of the presidential decree, the Cabinet of Ministers approved the relevant “List of legal entities in respect of which special economic measures are applied.” These are the former, and also in some cases remaining in this status, Gazprom subsidiaries from Europe, the USA and Singapore.

They not only stopped supplying gas. All financial transactions involving these enterprises are prohibited. Vessels belonging to them are denied access to Russian ports. The “black list”, which includes a total of 31 companies, has not been closed. The Ministry of Finance was instructed to supplement it, and in some cases, possibly, to reduce it.

Germany suffered the most. Number one on the list is Gazprom Germania GmbH, registered in this country and, in turn, owning the majority of “subsidiaries” of gas companies located in Germany and the UK. For example, the structure of Gazprom Germania is the distributor WinGas GmbH, also included in the “List” at number 11.

Also a subsidiary of Gazprom Germania is one of the key European gas traders Gazprom Marketing & Trading Ltd (18th in the list). At the same time, according to Bloomberg, WinGas provided 20% of the annual consumption of natural gas in Germany. And this is almost 40% of Russian gas imports to this country. As a result, Berlin loses 20 billion cubic meters a year.

German Vice Chancellor and Economy Minister Robert Habeck, speaking in the Bundestag on May 12, confirmed that Gazprom’s subsidiaries had stopped receiving gas from Russia.

Foreign energy companies subject to Moscow’s retaliatory sanctions will no longer be able to participate in the process of gas supplies from the Russian Federation. “Restrictions against them are blocking,” said Dmitry Peskov, press secretary of the President.

Empty polish pipe

In general, according to Alexei Grivach, Deputy Director General of the National Energy Security Fund, European countries will not receive up to 25% – 30% of last year’s level of Russian exports as a result of Russian counter-sanctions. That is, almost 40 billion cubic meters of natural (pipeline) gas and LNG. This is a significant blow to the EU economy. In addition, since May 11-12, the number of transit gas routes to the EU countries has sharply decreased.

Recall that on Wednesday the GTS Operator of Ukraine stopped accepting Gazprom’s applications for gas supply through the Sokhranovka GIS and the Novopskov compressor station, explaining the ban by the onset of military force majeure. The shortfall, according to Gazprom spokesman Sergei Kupriyanov, will amount to 34% of all Ukrainian transit. That is, the annual volume of deliveries to Europe due to the above decision will be reduced by 13 billion cubic meters.

In Ukraine, there is only one receiving point for Russian transit gas – the Sudzha GIS. Its throughput capacity does not exceed 77 million cubic meters per day. At the same time, on May 12, compared to the previous day, gas pumping through this station fell once by 30% – to 53 million cubic meters.

Today, Sergey Kupriyanov also announced that, in accordance with the Decree of the President of the Russian Federation and the government decree on counter-sanctions, the pumping of gas through the section of the Yamal-Europe gas pipeline (annual capacity of 32 billion cubic meters), controlled by EuRoPol GAS, 51% of shares in which belongs to Poland, is completely stopped. This company was also included in the Russian proscription list, since Warsaw imposed sanctions against Gazprom on April 26 and effectively expropriated its 49% stake in EuRoPol. However, according to Sergei Kupriyanov, in any case, Warsaw has not paid dividends due to Gazprom for a long time.

Germany has also been attacking subsidiaries of Gazprom since March. Recall that on March 31, Berlin actually requisitioned Gazprom’s subsidiary Gazprom Germania and all German companies controlled by it. The Ministry of Energy transferred them to the external management of the Federal Grid Agency. They tried to carry out a similar operation with the “daughters” of “Gazprom” in the UK. But market participants explained to local authorities that due to the complex corporate structure, in which the British “daughter” is subordinate to the German one, the gas will cost the island too much, since it will have to be bought only at spot prices.

The EU is on pause

Strictly speaking, it was the raider seizures of Russian assets in Germany, Great Britain and Poland that forced the Russian government to impose tough gas counter-sanctions against a number of “unfriendly” states. Including those who have not yet gone to pirate seizures with the aim of the last “Chinese” warning.

The gas market in Europe immediately reacted by rising prices. On May 12, they exceeded 1,200 dollars for one thousand cubic meters. The European authorities are holding a pause for the time being. They will most likely prepare the answer by May 18. On this day, the publication of the next plan of the European Commission to reduce gas dependence on Russia is scheduled.

However, the focus is mainly on significant and at the same time accelerated savings in energy consumption. Alternative sources of gas supplies to Russia, at least this year, are not foreseen. Although Robert Habek assures that there will be no power outages. The gas market is allegedly ready for this.

The cessation of exports to Europe of such significant volumes of gas is not beneficial for Russia itself. There is nowhere to sell 40 billion cubic meters this and next years. The corresponding infrastructure is not ready yet. And oil and gas revenues now remain key in the Russian budget.

Thus, according to the Ministry of Finance, in April the federal budget received almost 1.8 trillion rubles from this source. This is a historical maximum. In March it was 49% less, in February — 85%.

Therefore, Gazprom does not reject the conclusion of new contracts with other non-sanctioned European companies. Naturally, if the EU is interested in at least partially restoring the previous volumes of gas imports from Russia.

There are still chances for such an outcome. In any case, according to Bloomberg, another 10 European companies have opened ruble accounts with Gazprombank. In total, already 20 importers are ready to switch to the proposed payment scheme for gas in rubles. Another 14 companies requested relevant packages of documents for study. Italian Prime Minister Mario Draghi said in general that a number of German companies have already made payments in rubles, and he does not see the danger of violating sanctions in this.

Alexey Grivach, in an interview with an Expert correspondent, did not rule out a more pessimistic outcome of events. “No matter how much we have to completely abandon Ukrainian transit and reduce supplies via Nord Stream 1,” he noted.

However, there are also optimists. So, Igor Galaktionov, an expert on the stock market at BCS Mir Investments, is sure that a full-fledged gas embargo will not happen.

“Judging by the list of companies that are on the list, Russian counter-sanctions imply a ban on supplies through the former subsidiary of Gazprom, Gazprom Germania, which is now under the control of the Federal Network Agency of Germany. A complete cessation of gas supplies to Germany is probably out of the question. But certain operations, in particular, filling gas storage facilities, may be banned,” Igor Galaktionov told Expert and added that, based on this, “the news is neutral for the Russian ruble.”

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