Russia warns Poland and Bulgaria of gas supply cuts on Wednesday

A worker checks pipes at a gas compressor station on the Yamal-Europe gas pipeline near Nesvizh, some 130 km (81 miles) southwest of Minsk, on December 29, 2006.REUTERS/Vasily Fedosenko/File Photo

WARSAW, April 26 (Reuters) – Russian energy giant Gazprom has told Poland and Bulgaria it will stop gas supplies from Wednesday, in a major escalation of Russia’s wider dispute with the West over its invasion of Ukraine.

Poland and Bulgaria would be the first countries to have gas supplies cut off by Europe’s main supplier since Moscow launched what it calls a military operation in Ukraine on February 24. companies.

Russian President Vladimir Putin has demanded that countries he calls “unfriendly” agree to a scheme under which they would open accounts at Gazprombank and make payments for Russian gas imports in euros or dollars that would be converted into rubles.

Poland is a staunch political opponent of Moscow. The Polish gas company PGNiG (PGN.WA), whose gas deal with Russia expires at the end of this year, has repeatedly said it would not comply with the new payment scheme. He has also said he would not extend the contract.

It also did not extend its gas transit agreement with Gazprom in 2020. Since then, the Russian gas supplier has had to participate in pipeline capacity auctions via the Yamal-Europe gas pipeline from Belarus to Poland.

Poland’s gas supply contract with Gazprom is for 10.2 billion cubic meters (bcm) per year and covers around 50% of national consumption.

Earlier, data from the European Union’s network of gas transmission operators showed that physical gas flows through the Yamal-Europe route had stopped, but resumed later on Tuesday.

Poland’s energy supplies are secure, Poland’s Climate Ministry said on Tuesday, adding that there was no need to draw on gas reserves and gas supplies to consumers would not be cut off.

Gazprom has also informed the Bulgarian state gas company Bulgargaz that it will stop gas supplies from Wednesday, the Energy Ministry said. Bulgaria also had a contract expiring at the end of the year. It meets more than 90% of its gas needs with imports from Gazprom, around 3 bcm a year.

Tom Marzec-Manser, head of gas analysis at data intelligence firm ICIS, said: “This is a seismic warning from Russia.”

“Poland has had an anti-Russia and anti-Gazprom stance for several years, which is not the case with Bulgaria, so to see Bulgaria also isolated is also a big step forward in itself,” he added.

With a 3.5 bcm gas storage 76% full and several alternative supply routes available, Poland will not have to cut off supply to customers to cope with Gazprom’s supply disruption, government officials said.

The country can be supplied with gas through two links with Germany, including a reverse flow on the Yamal pipeline, a link with Lithuania with an annual capacity of 2.5 bcm due to open on May 1, and through an interconnector with the Czech Republic up to 1.5 bcm.

Another 5-6 bcm could be sent through a link with Slovakia that will open later this year.

In addition, PGNiG can import up to 6 bcm per year through the Swinoujscie LNG terminal on the Baltic Sea, and produces more than 3 bcm of gas per year locally in Poland. In October, a gas pipeline will be inaugurated that will allow the passage of up to 10 bcm of gas per year between Poland and Norway.

Bulgaria said it has taken steps to find an alternative gas supply and no restrictions on gas consumption are required for now.

Only a few buyers of Russian gas, such as Hungary and Uniper (UN01.DE), Germany’s main importer of Russian gas, have said it would be possible to pay for future supplies under the scheme announced by Moscow without violating European Union sanctions.

Germany’s grid regulator said it was monitoring the gas supply situation from Russia after the threat to supplies from Poland, adding that supply to Germany was currently guaranteed. read more

PGNiG said on Tuesday that it would take steps to restore the flow of gas in accordance with the Yamal contract and that any supply interruption was a breach of that contract.

He added that he has the right to claim damages for breach of contract.

Earlier on Tuesday, Poland announced a list of 50 Russian oligarchs and companies, including Gazprom, that would be subject to sanctions under a law passed earlier this month allowing their assets to be frozen. The law is independent of sanctions imposed jointly by EU countries.

The European gas market was closed at the time of writing, but prices have been volatile since February, reaching an all-time high of around €280 per megawatt hour (MWh) in early March amid risks of Russian gas supplies cut off.

The Dutch gas contract for the first month, the European reference, was around 98.20 euros per MWh at the close of trading on Tuesday.

Information from Alan Charlish, Joanna Plucinska, Marek Strzelecki, Marwa Rashad, Nora Buli, Christoph Steitz, Tsvetelia Tsolova, Stephen Jewkes; written by Nina Chestney in London; Edited by Rosalba O’Brien and Marguerita Choy

Our standards: The Thomson Reuters Trust Principles.