Russian Gas: Europe’s Worry, Putin’s Weapon

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Gazprom halted natural gas supplies to Poland and Bulgaria on Apr. 27, citing both countries' refusal to use Russia's new two-step payments system. That has prompted questions as to whether other recalcitrant European buyers might share the same fate — or whether they will bow to the Kremlin's payment demands. The immediate impact of the shutoff was muted since both countries have been trying to wean themselves off Russian gas. But the move represents Russian President Vladimir Putin’s most explicit weaponization to date of his country’s energy resources in its ongoing conflict with the West and will likely keep European prices elevated at least through the summer. It also provided support to oil markets, highlighting the continued geopolitical risk element and possibility for more significant disruptions to Russian petroleum flows. Poland's PGNIG and Bulgaria’s Bulgargaz both have long-term contracts with Gazprom expiring at the end of the year, and neither plans to renew them. PGNIG’s is for around 10 billion cubic meters per year and Bulgargaz's for 2.9 Bcm/yr — versus the 150 Bcm of Russian piped gas that Europe imported last year. Earlier in the week, Poland imposed sanctions on 50 Russian oligarchs and companies, including Gazprom and Russia’s No. 2 gas producer, Novatek. Warsaw may have been emboldened by the fact its gas storage is now 75% full, and alternative supplies of LNG and piped gas are about to come on line.

Gas Supply, Sanctions, Military Conflict, Crude Oil, Ukraine Crisis
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