Gazprom Warns Remaining European Gas Flows at Risk Over Legal Spat With Ukraine’s Naftogaz

Europe’s energy prospects heading into the winter months are getting bleaker by the minute. Not only did Europe wake up to the catastrophic news that three massive explosions at a magnitude of 2.3 on the Richter scale sabotaged the Nord Stream pipeline system, Gazprom is warning that Europe’s remaining natural gas flows through Ukraine my be axed due to a legal feud.

Over the last 24 hours, Europe learned that it may have to go without Russian gas this winter— even indefinitely. In a startling escalation of the energy fall-out between Russia and the EU, “powerful subsea blasts” were recorded near the three major Nord Stream pipeline leaks, which according to the Swedish Uppsala seismology centre, the second, much larger explosion corresponds to over 100 kilos of dynamite, suggesting the blast may have been the act of sabotage.

As if the circumstances surrounding EU’s energy supplies couldn’t become more grim, Gazprom is cautioning that gas shipments into Europe through two remaining routes— both of which flow through Ukraine— may be shutdown over a legal spat with the country’s energy company Naftogaz. In September, Naftogaz opened a new arbitration case against Gazprom, accusing the Russian energy giant of failing to pay for Ukraine’s gas transportation service. The Ukrainian company said “funds were not paid by Gazprom, neither on time nor in full” for the rendered transit.

In response, Gazprom argued that Naftogaz doesn’t have “appropriate reasons” to forego its transit obligations through the Sokhranovka point, a vital export route delivering about one-third of Russian gas into Europe. According to the Russian-owned energy company, the legal spat may force Moscow to sanction Naftogaz, meaning that Gazprom wouldn’t be able to pay transit fees to Ukraine, thus increasing the risk of a flow shutdown.

“In practice, this will mean a ban on Gazprom from fulfilling obligations to sanctioned bodies under completed transactions, including financial transactions,” said the Russian company, as cited by Reuters. This isn’t the first time flows were suspended through the Sokhranovka point: back in May, Ukraine halted gas transit, blaming Russia for the decision and threatening to reroute flows to other regions.

Should Moscow follow through with the sanctions and subsequently prompt Ukraine to halt gas flows, then there would only be one remaining route to ship supplies to Europe— via the TurkStream pipeline to Turkey. Following the dismal announcement from Gazprom, natural gas prices sharply jumped nearly 20%, as markets priced in the dark reality that Europe may actually be without Russian gas this winter.

Information for this briefing was found via Reuters, Bloomberg, and the sources mentioned. 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.

Leave a Reply