Moscow late Wednesday sanctioned the former Gazprom PJSC subsidiary — which is now under the control of the German energy regulator — including energy supplier Wingas GmbH and London-based unit Gazprom Marketing & Trading Ltd. The move could also upend LNG markets, and bring even greater supply worries.
Still, German Economy Minister Robert Habeck downplayed the impact, saying the Russian cuts amount to just 3% of the country’s imports. The nation was getting shipments from alternate sources and can cope with the disruption, he said. Utility RWE AG said Russia’s new sanctions are “not material.”
The new risks come just as a solution appeared to be emerging for what has been the main headache for weeks — Moscow’s demand for ruble payments for its gas. Companies were increasingly confident they could keep buying Russian supplies without breaching sanctions, with Italian Prime Minister Mario Draghi on Wednesday appearing to back such a move. More European buyers are opening ruble accounts.
Also See: Ten More European Gas Buyers Open Ruble Accounts for Payments
“The developments are only the latest in a string of a steady deterioration of security of supply amid the war,” Eurasia Group said in a note. “The ongoing disruptions will therefore mean EU states will step up preparations for bigger gas supply disruptions from Russia this year.”
Dutch front-month gas, the European benchmark, was 20% higher at 113.01 euros per megawatt-hour as of 1:54 p.m. in Amsterdam. The UK equivalent was up 37%. German power also surged, with next month’s contract rising as much as 17%.
Concerns over Russian supplies have hung over the market for months. Flows via Ukraine could hit the lowest since late April, grid data show. This should affect a key gas-transit route crossing Slovakia and Austria. Authorities in Vienna said there are currently no limitations on delivery.
Supplies via the Nord Stream link to Germany, the biggest pipeline route from Russia to Europe, remain stable. But, separately, flows from Norway are set to decrease on Thursday.
Ukraine’s gas grid on Wednesday stopped accepting Russian fuel at one of the two key entry points, saying it could no longer control relevant infrastructure in the occupied territory in the eastern part of Ukraine. Gazprom said it wasn’t able to reroute all supplies to another entry point because of how its system currently works.
No Russian gas is flowing into the Sokhranivka station on the Ukrainian border for a second day. Sokhranivka had handled about a third of Russia’s gas flows crossing Ukraine before the halt, with the rest passing through Sudzha, the other entry point.
“Lost Sokhranivka supply is not dramatic, but it sends a signal for what might come down the road,” analysts at SEB said in a note. “This does not scream crisis, but it is a wake-up call for what is to come. We could likely see more supply disruptions going forward.”