Gazprom Piles Pressure on Europe

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The restart of Gazprom’s Nord Stream gas pipeline last week has proved temporary relief for Europe, as the Russian gas giant now plans to ratchet up the pressure by cutting flows to just 20% of capacity on Jul. 27.

The move fits into Moscow’s tactic of obstructing European efforts to inject more gas into storage ahead of winter, although Gazprom insists it needs to repair another Siemens gas turbine at Nord Stream's Portovaya compressor station, reducing flows to 33 million cubic meters per day — just below half of the previous volumes of 68 MMcm/d.

The latest measure suggests Moscow is seeking to remind Europe of the direct costs involved of placing more sanctions on Russia or increasing its military support to Ukraine amid the ongoing war, aside from the commercial advantage of prolonged high gas prices for Gazprom.

Sanctions Concessions?

Sanctions relief appears to be the primary motive. When Gazprom did restrict supply previously, this later helped it to gain a sanctions waiver from Canada allowing for the return of the Siemens turbine to Russia.

In its Jul. 25 statement, the Russian gas giant said that Canada’s waiver was not enough. Documents issued by Canada and provided by Siemens Energy to Gazprom “do not remove the previously stated risks and raise additional questions,” Gazprom said.

Moreover, the firm said it still has unresolved questions regarding EU and UK sanctions, which are important for the return of the gas turbine to Russia and for the repair of other turbines from Portovaya.

However, it is unclear which sanctions Gazprom is referring to, as Europe has abstained from targeting Russian gas exports in its sanctions packages since the war in Ukraine began. Gazprom said it had again asked Siemens to submit the required documents and clarifications to resolve outstanding questions.

The turbine is now in Germany, waiting for some customs documents from Russia, while Moscow seems to be in no hurry to get the turbine back.

Once the turbine is operational, Nord Stream flows could return to 68 MMcm/d, but Gazprom’s latest statements do not suggest it plans to do this.

Flows Restricted

Since Nord Stream restarted flows on Jul. 21, it has operated at the pre-shutdown levels of 68 MMcm/d previously seen since mid-June.

Exports via Ukraine have ticked up just above 40 MMcm/d, or some 55% of the currently available transit capacity, since mid-May, and have not changed since Nord Stream reduced flows amid annual maintenance.

Since mid-July, the Ukrainian route shipped less gas than the Europe-bound spur of the Turk Stream offshore pipeline, which this week is likely to become the largest export route for Russian gas after the additional cut in Nord Stream flows.

Launched in 2020, Turk Stream now supplies Turkey, Greece, North Macedonia, Serbia, Bosnia and Herzegovina, Romania, Hungary and Croatia. Turk Stream also supplied Bulgaria before Gazprom cut it off in April after Sofia rejected Moscow’s new two-step payment scheme involving the ruble.

Storage Under Pressure

Further Nord Stream flow cuts will keep European storage under pressure. After the shutdown the EU had a chance to resume injections at a higher level, most notably in Germany, which had to report net withdrawals from storage on two days during the Nord Stream shutdown.

Now storage in both Germany and across the EU is some 66% full, which is impressive for midsummer, given the tight deliveries from Russia — historically the key supplier of pipeline gas to the European market.

Observers suggest that Europe could reach its storage targets ahead of winter even with the current restricted Nord Stream flows, but the looming cut this week will make this task much harder.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact >

Gas Supply, Sanctions, Ukraine Crisis
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