The European Union (EU) should prepare for Russia to switch off gas supplies into Europe, the trading bloc’s executive arm will warn tomorrow.
Proposals for completely cutting off the EU’s reliance on Russian energy imports by 2027 are set to be published on Wednesday by the European Commission, according to The Times.
The plans will include warnings Russia will likely use a “supply shock” to blackmail the EU as the war in Ukraine persists, and sanctions take their toll on Russia’s economy.
It will also suggest a temporary cap on EU gas prices, while highlighting potential risks such as the “major negative effect” of losing “price as an important information for gas demand in times of crisis”.
Russia has already cut off gas supplies to Poland and Bulgaria after both countries failed to meet demands for rouble payments, while it has also shut off electricity to Finland after announced its intention to join NATO.
The Commission warned: “A different set of measures may become worth considering in the event of a sudden large scale or even full disruption of the supplies of Russian gas leading to unbearably high gas prices and inadequate supply of gas.”
The guidance also warned that any announcement of a future gas price cap could also act as a disincentive for companies to store supplies in advance.
The EU remains dependent on Russia for around 40 per cent of its gas supplies, with both Germany and Austria bringing in emergency measures which will allow them to take control of industries if there are supply shortages.
Lithuania is the only European nation to bring in sanctions against Russian gas, phasing out imports from Kremlin-backed suppliers.
By contrast, multiple other EU member states and companies have conceded to Russian requirements to pay for gas in roubles.
Last month, Russian President Vladimir Putin signed into law a requirement for ‘unfriendly nations’ to pay for its gas supplies in the Russian currency, even if contracts had been agreed in euros or dollars.
Buyers would be required to open Gazprombank accounts, and transfer currencies to be converted to roubles before transactions are completed.
This would breach EU sanctions, which require for contracts to be honoured and payments to be made in agreed currencies.
However, the bloc has brought in a compromise measure for companies and member states where they have to sign off on deals being completed as soon as they first offload their currency.
The EU has relied on liquefied natural gas (LNG) supplies – chiefly from the US to meet its energy needs – with the continent now heading into the summer – a period of reduced demand.
Nevertheless, it is scrambling to avoid supply shortages this winter – demanding EU member states commit to keeping storage at 80 per cent.
Meanwhile, German Chancellor Olaf Scholz has admitted longstanding failures to build the infrastructure, such as new pipelines or LNG terminals, for alternative sources of gas other than Russian hydrocarbons had been “naive”.
He said: “Yes, we should have put ourselves in a position to embrace other suppliers at any time by building the pipelines, the ports, so that we could have got our gas from elsewhere.”