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8:24pm 28/04/2022
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What does Russia’s gas shut-off mean for Europe?
By:Stanislaw WASZAK / AFP

WARSAW: Russia’s state energy giant Gazprom on Wednesday stopped all gas supplies to Poland and highly dependent Bulgaria, raising the specter of a shortage in the region — and Europe as a whole.

AFP takes a look at the continent’s disrupted gas market against the backdrop of the Russian invasion of Ukraine.

Why did Moscow turn off the taps?

President Vladimir Putin had said last month that Russia would no longer accept payments in currencies other than the ruble in retaliation for the West’s economic sanctions against Moscow over its invasion of Ukraine.

He had warned “unfriendly” countries, including all EU members, that they would be cut off from Russian gas unless they opened an account in rubles to pay for deliveries.

Moscow had said buyers were to transfer payments in foreign currency, which the bank would then convert into rubles and transfer into the buyer’s ruble account.

“The need for a new payment method was a result of unprecedented unfriendly steps,” Kremlin spokesman Dmitry Peskov said on Wednesday.

Several countries — including France, Germany and Poland — had already said “nyet” to the ruble demand.

According to Claudia Kemfert, an energy expert at Germany’s DIW think-tank, “the stoppage of gas deliveries from Russia to Poland and Bulgaria marks a new stage in Putin’s escalation to make Europe panic”.

However, she added, “one should not expect supply difficulties for the moment, as Germany and Europe are sufficiently stocked with gas”.

How important is natural gas for Russia’s budget?

According to the Gazprom Export website, 68 percent of the energy giant’s gas exports went to Europe in 2020.

Out of a total 174.9 billion cubic meters of exports, 119.35 billion went to Europe, including nearly 49 billion to Germany alone, nearly 21 billion to Italy and more than 13 billion to Austria.

According to the International Energy Agency (IEA), revenue from oil and gas-related taxes and export tariffs made up 45 percent of Russia’s federal budget in January, the month before it invaded Ukraine.

“Considering current market prices, the export value of Russian piped gas to the EU alone amounts to US$400 million per day,” the agency said on its website.

What is Russia’s market weight in Europe?

Last year, Russia supplied 32 percent of the total gas demand of the European Union and Britain, up from 25 percent in 2009, according to the IEA.

The situation varies significantly from country to country, however.

While EU data agency Eurostat reported in 2020 that Finland depended on Russian gas for 97.6 percent of its demand, the Baltic states Estonia, Latvia and Lithuania announced earlier this month that they had broken gas ties with Russia and were instead being served by gas reserves stored underground.

A target of Russia’s gas shut-off, Bulgaria depends on Russia for around 85 percent of its gas, as much as Slovakia.

While Germany’s dependency is at 55 percent, its economy ministry said that the country’s “security of supply is currently guaranteed”.

What about Poland?

The other target of the gas shut-off, Poland consumes up to 21 billion cubic meters of gas per year. Its prime minister Mateusz Morawiecki said the EU member was “ready to face even a total break” from Russian gas.

Poland itself produces around 4.5 billion cubic meters of gas and has a liquefied natural gas (LNG) terminal with a current transfer capacity of 6.5 billion cubic meters that is due to be expanded to 8 billion.

According to the Polish government, gas storage facilities are 76 percent full and Poland has gas interconnections with all of its neighbors.

The country can also count on the launch this October of the Baltic Pipe pipeline, with an expected capacity to deliver up to 10 billion cubic meters of Norwegian gas.

Morawiecki said Poland would be just fine, despite the Russian gas halt.

“We’ll deal with this blackmail, this pistol to the head in such a way that it doesn’t affect Poles,” he said Wednesday.

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