Russian Gazprom shuts off Netherlands gas supply today

Russian Gazprom shuts off Netherlands gas supply today
Credit: Belga

The Russian state gas company Gazprom will stop supplying the Netherlands gas trader GasTerra from today, the Dutch company announced on Monday.

GasTerra, which is part-owned by Shell, Esso Nederland and the Dutch state, refused to acquiesce to the demands of Russian President Vladimir Putin and pay its bills in rubles.

"GasTerra will not be supplied with 2.0 billion m³ of gas by Gazprom during the period 31 May to 30 September 2022," the company announced in a press release.

At the end of March, Russia responded to Western sanctions imposed after the invasion of Ukraine by announcing that payments for gas would have to be made in rubles.

In concrete terms, this means that buyers of Russian gas would have to open both a euro and a ruble account at the Gazprombank in Moscow, something that GasTerra refuses to do.

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"These payment requirements risk violating the EU sanctions," GasTerra said, while also referring to the financial and operational risks of "opening accounts in Moscow under Russian law and its control by the Russian regime."

The Netherlands is not the first country that Russia has stopped supplying with gas; deliveries to Finland, Poland and Bulgaria were shut also off for the same reason.

GasTerra's contract with Gazprom was set to end on 1 October 2022, after which it will not be renewed. The company had anticipated Russia's powerplay by purchasing gas elsewhere.

While the European gas market is highly integrated and large, the company stressed that it is currently "impossible to say in advance" what effect the loss of 2 billion m³ of Russian gas will have on supply and demand. The development will test the resilience of the European market.

The gas price on the leading Amsterdam stock exchange shot up after the announcement of GasTerra, but the spike was short-lived.

Denmark next?

Denmark is also taking into account that it will soon run out of gas supplies from Russia. The country's largest energy company, Orsted, announced that it is preparing for the end of supplies from Gazprom after it refused to pay in rubles.

The deadline expires tomorrow, with Orsted insisting that it continues paying in euros. Technically, Orsted has a long-term contract with Gazprom for the supply of 20 TWh per year, which still runs until 2030.

Earlier this year, the company indicated that it would buy far less Russian gas this year than the contract allows. Denmark is a relatively small consumer of Russian gas and also gets part of its provision from domestic production, but that is now lower due to maintenance work at its Tyra field.

However, the Danish energy company expects to find sufficient alternative supplies on the European wholesale market.

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