Gas prices in Europe rose by a fifth on Wednesday after Russian Gazprom suspended supplies to Poland and Bulgaria, claiming they had not made ruble payments that were supposed to be the day before.
Futures that track Europe’s wholesale gas prices have risen by almost 20% to 117 euros per megawatt hour in early trading. Prices are almost seven times higher than a year ago.
“Gazprom has completely suspended gas supplies to Bulgaria (Bulgaria) and PGNiG (Poland) due to non-payment in rubles,” Gazprom said in a statement on Wednesday.
Gazprom Exports, a subsidiary of the group’s exports, has not received any payments for the April supply from Bulgaz and PGNiG in rubles as of the end of the business day on April 26, as required by the new Russian rule, it was reported.
Russian President Vladimir Putin has stated vigorously that Gazprom gas will be exported to so-called unfriendly countries, including the EU, starting in April and will be sold for rubles only according to a plan agreed between Gazprom, Gazprombank, Russia’s central bank and government.
Many European buyers refused to pay in rubles, saying it contradicted the terms of the contract and would be a way to circumvent EU sanctions on the Russian central bank.
“Politically, this raises the stakes for the EU Commission’s decision on whether the new payment system will violate sanctions, and hence, will likely maintain high market volatility,” Goldman Sachs analyst Samantha Dart said in a comment to clients.
Gazprom Exports notified Bulgargas and PGNiG of the suspension of gas supplies from April 27 until payment is made in accordance with the established procedure, the company said. He warned that unauthorized withdrawal of gas volumes passing through Poland and Bulgaria to other European countries such as Germany would result in a reduction in transit supplies.
“Bulgaria and Poland are transition countries,” Gazprom said. “In the event of unauthorized withdrawal of Russian gas from transit volumes to third countries, supply for transit will be reduced by that volume.”
Russia said the shift to ruble payments for its gas instead of euros or dollars was in response to Western sanctions against its central bank, which froze about half of the country’s foreign reserves.
Europe is dependent on Russia for more than a third of its gas needs. Gazprom holds a monopoly on gas supply in Russia.
Hungary has meanwhile signed a deal to pay into a euro-denominated account with Gazprombank, which in turn will deposit the amount in rubles for Gazprom exports, Foreign Minister Peter Shaijarto said in a video posted on Facebook. Her next payment is due on May 22, he said. Slovakia has reached the same agreement, he added.
He assured the Hungarians that although the country’s gas supply came through Turkey, Bulgaria and Serbia from Russia, the passage through Bulgaria would not be affected and the country would continue to receive its supply “according to the contract and according to the plan”.
European gas prices soar after Gazprom halts supplies to Poland and Bulgaria Source link European gas prices soar after Gazprom halts supplies to Poland and Bulgaria