Gazprom Threatens Total Energy Export Halt… Again

The chief of the state-owned Gazprom threatened to cease gas supply to the European Union if the latter set a price cap on the commodity.

According to news agency Tass, Gazprom CEO Alexei Miller stated on state television that the company is guided by contractual terms in its supply deals with EU clients and that a price cap would be a breach of contract.

“Such a unilateral decision is definitely a violation of the essential contract terms, which will entail the suspension of supplies,” Miller said.

His comments come on the heels of the news that the European Commission is said to be mulling package measures to control gas prices, including putting a cap on transactions on the Dutch TTF and on Russian import prices.

Russian gas exports are already thin as it is after Gazprom closed down the Nord Stream 1 pipeline indefinitely. This was followed by recent discovery that the twin pipelines have leaked into the Baltic Sea–allegedly caused by sabotage–with a German daily describing the pipes as “unusable forever.”

Moscow now exclusively sends gas to Europe through the Sudzha entry point on the Ukrainian border and the TurkStream pipeline. However, a number of key Gazprom clients in the EU, including Hungary, Austria, and Italy, continue to get Russian gas via the two channels.

Gas futures are trading at its lowest since late June, as plentiful LNG supplies, mainly from the United States, have assisted countries in filling storage sites ahead of the winter session. Europe’s gas storage installations are more than 91% full, well above the five-year norm, with Germany topping the list at 95%.

Source: Trading Economics

This is not the first time Russia threatened a total energy export halt to Europe. Gazprom warned the union in late September that gas shipments may be shut down over a legal spat with the Ukraine’s energy company Naftogaz. The latter recently opened a new arbitration case against Gazprom, accusing the Russian energy giant of failing to pay for Ukraine’s gas transportation service.

Russian President Vladimir Putin himself cautioned the continent of withdrawing all energy exports should they adhere to price caps.

“We will not supply gas, oil, coal, heating oil — we will not supply anything,” he said.

This was reiterated in Putin’s latest address at the Russian Energy Week forum in Moscow, saying Russia “will not supply countries that set a cap on Russian oil prices.”

But the threat to halt gas shipments goes against what Putin relayed at the forum, assuring everyone that Russian gas could still be sent to Europe via one of the Nord Stream 2 pipeline’s remaining intact lines, but the decision is now in the hands of the European Union.

Information for this briefing was found via S&P Global. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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