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European gas prices soar after Gazprom halts supplies to Poland and Bulgaria

European fuel costs rose by as a lot as a fifth on Wednesday after Russia’s Gazprom suspended provides to Poland and Bulgaria, saying the nations had did not make rouble funds that had been due a day earlier.

Futures contracts monitoring Europe’s wholesale fuel worth gained about 20 per cent, earlier than paring positive aspects to commerce 8 per cent larger at €106 per megawatt hour. Prices are greater than six instances larger than a 12 months in the past.

The euro, which has declined steadily since February, fell to a five-year low in opposition to the greenback on Wednesday.

“Gazprom has completely suspended gas supplies to Bulgargaz (Bulgaria) and PGNiG (Poland) due to non-payment in roubles,” Gazprom mentioned in an announcement.

Ursula von der Leyen, European Commission president, accused Russia of trying to make use of fuel as “an instrument of blackmail” after Gazprom’s choice to droop deliveries.

In an announcement, she known as its motion “unjustified and unacceptable” and mentioned it pointed to Russia being an unreliable fuel provider. Von der Leyen mentioned the EU was ready for the situation, nevertheless, as tensions rise between Russia and the west over its invasion of Ukraine. The EU had been working to make sure different deliveries and the “best possible” fuel storage ranges, she added.

Europe is dependent upon Russia for greater than a 3rd of its fuel wants. Gazprom holds a monopoly on pipeline fuel provides in Russia.

Germany, which derives 40 per cent of its imported fuel from Russia, mentioned it was persevering with to obtain Russian fuel unimpeded. “Germany’s security of supply is currently assured,” a spokesman for the Federal Network Agency, the regulator that oversees Germany’s power infrastructure.

The German financial system ministry mentioned “for the time being we have not identified any shortages”. 

“But we are concerned that there has been a shut-off in supply to our European partners. We are co-ordinating closely within the European Union to form an overview of the situation. The relevant bodies are currently meeting.”

Mateusz Morawiecki, Poland’s prime minister, accused Russia of “gas imperialism” after Gazprom reduce off provides however insisted that the nation would be capable to cope with out Russian hydrocarbons.

“Russia has moved the borders of gas imperialism a step further. This is a direct attack on Poland . . . But we have been preparing for this moment for years,” Morawiecki mentioned. “From the autumn, Poland will not need Russian gas at all. We will cope with this blackmail, with this gun to our head in such a way that Poles will not feel it.”

Poland imported 45 per cent of its fuel from Russia in 2020 beneath a long-term contract with Gazprom. But the contract expires on the finish of this 12 months, and Poland has spent the previous few years investing in infrastructure that can enable it to make do with out Russian fuel.

Poland and Bulgaria’s contracts with Gazprom enable for about 13bn cubic metres of fuel imports per 12 months, equal to eight per cent of EU imports from Russia final 12 months, in line with ICIS, a commodity evaluation agency.

Russia’s president Vladimir Putin decreed in March that Gazprom fuel exported to so-called unfriendly nations, which embody EU members, could be offered just for roubles.

Russia mentioned the transition to rouble funds as a substitute of euros or {dollars} was a response to western sanctions in opposition to its central financial institution, which froze about half of the nation’s overseas reserves.

Multiple European patrons refused to pay in roubles, saying it contradicted contract phrases and could be a strategy to bypass EU sanctions on the Russian central financial institution.

Hungary, in the meantime, has struck a deal to pay right into a euro-denominated account with Gazprombank, which in flip will deposit the quantity in roubles to Gazprom Export, overseas minister Peter Szijjarto mentioned in a video posted to Facebook. Its subsequent fee was due on May 22, he mentioned. Slovakia had reached the identical settlement, he added.

Szijjarto assured Hungarians that, though the nation’s fuel provide arrived through Turkey, Bulgaria and Serbia from Russia, transit by Bulgaria wouldn’t be affected and the nation would proceed to obtain its provide “according to the contract and according to plan”.

Gazprom Export notified Bulgargaz and PGNiG of the suspension of fuel provides from Wednesday till fee was made in accordance with the decreed process, the corporate mentioned. It warned that the unauthorised withdrawal of fuel volumes transiting by Poland and Bulgaria to different European nations resembling Germany would end in a discount of transit provides.

“Bulgaria and Poland are transit states,” Gazprom mentioned. “In the event of unauthorised withdrawal of Russian gas from transit volumes to third countries, supplies for transit will be reduced by this volume.”

Additional reporting by Harry Dempsey in London, Guy Chazan in Berlin and James Shotter in Warsaw

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