The United States and the European Union have warned against giving in to what they called Russian “blackmail” over gas supplies to Europe. 

 

Russia, which supplies about 40% of Europe’s gas needs, had demanded that what it called “unfriendly” European countries pay their gas bills in rubles — seen as a way to prop up the currency in the face of Western sanctions on Russian banks, including its central bank. Some EU states have set up Russian bank accounts to try to work around the sanctions.

President Joe Biden said Thursday that the U.S. was helping its European allies to diversify gas supplies. 

 

“We will not let Russia intimidate or blackmail their way out of these sanctions. We will not allow them to use their oil and gas to avoid consequences for their aggression. We’re working with other nations like Korea, Japan, Qatar and others to support our effort to help European allies threatened by Russia with gas blackmail and their energy needs in other ways,” Biden told reporters at the White House. 

 

“Aggression will not win. Threats will not win. This is just another reminder of the imperative for Europe and the world to move more and more of our power needs to clean energy,” he said.

 

Cutoff 

 

Russian state-owned gas giant Gazprom cut off supplies to Poland and Bulgaria on Wednesday after they refused to pay in rubles. The two EU member states insist that the contracts stipulate payment in euros. 

 

“This time, Russia has pushed the border of imperialism — gas imperialism — another step further. This is a direct attack on Poland,” Polish Prime Minister Mateusz Morawiecki said Thursday during a visit to the Zambrow compressor station, which receives gas from Russia.  

 

“Thanks to our actions, Poland will not need Russian gas at all from the fall. But we will also deal with this blackmail, with this gun at the head, so that the Poles will not feel it,” Morawiecki added. 

 

Visiting the devastated town of Borodyanka in Ukraine on Thursday, Bulgaria’s Prime Minister Kiril Petkov said his country could cope without Russian gas. 

 

“Bulgaria will not be indifferent to this tragedy. We are in a firm position, as part of the democratic world, as part of the European Union, that we will stand by Ukraine. Because this is not just the battle of Ukraine, this is a civil choice of which side we want to stand with,” Petkov told reporters. 

 

Diversifying supplies

Poland and Bulgaria had declined to extend their gas contracts with Gazprom beyond this year. Both are diversifying their supplies of pipeline and liquified natural gas (LNG), said Tom Marzec-Manser, head of gas analytics at Independent Chemical & Energy Market Intelligence. 

 

“Given they were ending those contracts, they had already begun to invest in new infrastructure, or developing infrastructure, or sign new pipeline supply contracts or LNG contracts to backfill those volumes that would have been lost by the beginning of 2023 anyway. So, Poland’s going to get a new pipeline directly connecting it to Norway. There’s a second pipeline between Greece and Bulgaria, which will specifically carry Azerbaijani gas,” Marzec-Manser told VOA.

“Polish storage is incredibly high at the moment, and therefore it almost looks like they were prepared that something like this might happen,” he said.

 

Serious sanctions

Many other European states continue to import Russian gas. Several European gas companies — including those from Germany, Austria, Hungary and Slovakia — have, at Moscow’s insistence, opened accounts with Gazprom Bank in Switzerland. The contracts are paid in euros but immediately converted into rubles.

Visiting Tokyo on Thursday, German Chancellor Olaf Scholz told reporters that his country could not risk losing Russian gas supplies in the short term. 

“Any interruption would have consequences for the economic situation. That is clear, and the government is also very clear about that,” Scholz told reporters. 

 

“We know that it is a challenge that many European countries, including Germany, are dependent on imports of fossil resources from Russia. And that’s why we set out very early, even long before the outbreak of this war, to analyze this situation in concrete terms and to derive decisions from it.  

 

“That has put us in a position where we can now stop imports of [Russian] coal by the autumn. That will put us in a position to reduce and replace imports of coal bit by bit. And the same will happen for gas. But that is a process that will require more time,” Scholz said. 

 

EU warning

European Commission President Ursula von der Leyen warned members against giving in to Russia.  

“Companies with such contracts should not accede to the Russian demands. This would be a breach of the sanctions. So, a high risk for the companies,” she said Wednesday. 

 

It’s not yet clear if those gas companies will face penalties for routing payments via Gazprom Bank. Marzec-Manser said Russia faces a dilemma.

“Had a major German or Italian gas customer with contracts not just ending at the end of this year but, say, contracts running through to 2035, had they not agreed to do the switch in terms of their banking setup, would a cutoff have happened to them? Because the revenue impact on Gazprom would have been immense,” he said.

 

Russia’s reputation also has taken a hit, Marzec-Manser added.  

“Until about a year ago, the reputation from a gas market perspective was considered to be a reliable one,” he said. “That’s since long gone, even before the Ukraine war, I would say.” 

 

European nations say they are making preparations in case Russia turns off the gas taps. But analysts say such a move also would cost the Kremlin hundreds of billions of dollars a year in lost revenue.
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