Russia has escalated its economic warfare with Europe, with Gazprom widening gas cuts across the continent in retaliation to Western sanctions.
The Kremlin-backed gas giant turned off the taps to the Netherlands today, halting business with top Dutch trader GasTerra – contributing to a four per cent spike natural gas prices.
It has now announced its intention to cut off supplies to Danish supplier Orsted and to Shell Energy for its German contract.
All three energy firms have refused to pay for Russian gas in roubles, having signed agreements with Gazprom to pay in euros for their energy supplies.
These are not the first European companies to suffer suspensions of energy supplies from Russia, with Gazprom having already cut gas flows to companies operating in Bulgaria, Poland and Finland.
The latest moves from the energy giant follow the EU finally agreeing to a ban on Russian oil – having watered the pledge down to include only seaborne supplies, which make up two-thirds of EU imports.
Currently the EU depends on Russia for around a quarter of its crude imports.
EU leaders have agreed in principle to cut the EU’s Russian oil imports 90 per cent by the year-end, stepping up pressure on the Kremlin.
The remaining 10 per cent would be temporarily exempt from the embargo so that landlocked countries such as Hungary, Slovakia and the Czech Republic have access via the Druzhba pipeline from Russia.
“The sanctions have one clear goal: To prompt Russia to end this war, to withdraw its troops, and to agree a sensible and fair peace with Ukraine,” said German Chancellor Olaf Scholz.
Gas restrictions remain unlikely despite Russian retaliation
The oil ban will be the centrepiece of the trading bloc’s sixth package of sanctions against Russia following the country’s invasion of Ukraine in February, and will also include booting Sberbank from the SWIFT system and freezing the assets of more high net-worth individuals linked to the Kremlin.
Earlier this year, Russian President Vladimir Putin year signed into law requirements for ‘unfriendly’ overseas nations to pay for gas in roubles, even if their contracts did not stipulate that demand.
Despite the refusal of some EU member states, multiple European energy firms have acceded to the request through a murky currency conversion system which technically does not breach EU sanction.
This includes Germany energy giant Uniper which made its first rouble payment for Russian gas today.
While the EU has finally reached a deal to phase out Russian oil imports, there is no sign of the bloc banning Russian natural gas.
Only Lithuania has unilaterally declared an embargo on Kremlin-backed gas supplies.
Instead, the continent has been rushing to fill its gas storage sites to shore up supplies ahead of winter, wary of cuts in supply from Russia, which typically provides around 40 per cent of Europe’s gas needs.
The trading bloc’s executive arm, the European Commission, has pushed member states to ensure 80 per cent of gas storage is filled domestically across every EU country ahead of this winter.
However, the latest estimates from Gas Infrastructure Europe reveal EU gas storage is only 46 per cent filled going into the summer.