Gazprom Threatens to Reduce Gas Flows to Europe Via Ukraine

The Ukraine route is the last remaining pipeline still bringing Russian gas to western Europe as Moscow has progressively squeezed supplies to the continent since before the war. Traders and policy makers have been bracing for flows on that line to be curbed too, and prices rose as much as 5.2% on the news, while a few months ago the move could have been much more dramatic.

The Russian producer said on Telegram some volumes meant for Moldova are being kept in Ukraine. Gazprom warned it will limit transit volumes from Nov. 28 corresponding to the amount of gas not reaching Moldavian customers. The route is also used for further transport to Europe, already at much reduced levels.

Ukraine delivered all volumes assigned for Moldova in full, the country’s transmission system operator said on its website. All Moldova-bound gas received at the Sudzha cross-border point with Russia was shipped on via the Oleksiyivka and Hrebenyky exit points on the Moldovan border.

At the same time, starting from September, Moldova and Ukraine organized virtual reverse gas flows at the Hrebenyky point, according to the statement from Ukraine. Virtual reverse flows mean that some Russian gas volumes meant for Moldova may stay in Ukraine, including for storage purposes.

There are concerns in Europe that the issue with Moldova may be the beginning of a complete shutdown as disputes over contractual clauses and regulation have been a feature of the meltdown in economic ties between Russia and the west. Even with fuller-than-normal inventories providing some buffer, winter without any Russian gas would be a challenge for Europe.

The market has already factored in the potential for further cuts to Russian flows, so it will only move when the possibility becomes reality, said Katja Yafimava, senior research fellow at the Oxford Institute for Energy Studies.

“So far this seems to be an isolated Moldova-Ukraine issue,” Yafimava said.

Gazprom’s threat to cut shipments to Moldova is an attempt to block the country from using the Ukrainian gas transit system and its underground storage, the Ukrainian transmission operator said.

“This is about blatant manipulation of facts for the sake of justifying the decision to further reduce volumes of gas for Europe,” TSO government relations manager Olga Bielkova said, according to the statement.

Reducing Supplies

Gazprom calculates that so far Ukraine has accumulated 52.52 million cubic meters of gas that was meant for Moldova, it said. If those imbalances remain, Gazprom will begin reducing supplies to Ukraine from 10 a.m. on Nov. 28. Gazprom currently sends around 43 million cubic meters per day to Europe via Ukraine.

Since October, Gazprom has reduced flows to Moldova to 5.7 million cubic meters a day and had pledged to keep them at that level next month as well.

Benchmark futures pared earlier gains by 5:04 p.m. in Amsterdam to trade up 3.2%, and are almost four times higher than usual for this time of the year. Still, Europe is now in a comfortable position with strong LNG imports and reduced industrial demand amid high prices helping counter months of Russian supply curtailments.