Russian threat of European gas disconnection begins to fade

The threat of an abrupt halt in Russian gas exports to Europe has receded as European Union authorities and Russian officials move closer to a deal that will avoid a stalemate over currency denomination demands .

The European Commission reportedly issued guidelines on Friday on how EU companies can pay for Russian gas without breaching sanctions imposed since Russia’s invasion of Ukraine, heeding Moscow’s demands to tip the payment towards the weakened Russian ruble.

Updated EU guidelines, which are expected to become official later this week, will set out the conditions under which companies can avoid sanctions, the Bloomberg news agency reported.

The guidelines would confirm that EU sanctions do not prevent companies from opening an account at a designated bank in accordance with Russian requirements, as long as their own deposits are in the currency denominated in existing contracts and report the transaction made when she is paid as such.

Almost all supply contracts EU companies have with Russian gas giant Gazprom are in euros or dollars.

Deadlines for payment of gas supplies from the April pipeline by Gazprom are set to come in the second half of May, with Moscow insisting on a new plan that will involve the country’s main bank, Gazprombank, and the conversion of incoming payments into rubles. .

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Hostile nations

Russia used the refusal of Polish and Bulgarian buyers to join this program as an excuse to stop gas supplies to these two countries altogether, but took no action to stop gas supplies to other countries. Europeans.

The Kremlin designated EU countries among a list of “hostile states” after introducing and backing sweeping sanctions against Russia in response to Russia’s military invasion of Ukraine.

Ukraine’s neighbor Moldova has decided not to take a position on the right to pay in euros, according to the chairman of the board of directors of Moldovan gas importer and distributor Moldovagaz.

A decree signed by Russian President Vladimir Putin on March 31 said Gazprom should impose a single payment system for customers from “hostile states”.

Data subjects are advised to open foreign currency and ruble accounts with the Russian bank Gazprom so that payments in euros or US dollars are accepted and converted into rubles before sending them to Gazprom accounts.

About 20 European buyers are said to have opened such dedicated accounts with Gazprombank even before receiving firm guidelines from the EC on whether the payment system violates existing sanctions against Russia.

Fourteen other Gazprom customers have asked Gazprombank for the documents needed to set them up, an unidentified bank source told Bloomberg.

russian press

Gazprom customers in northwest Europe are unlikely to see many options to buy more pipeline from Russia above their contract minimums anytime soon.

Only one of the export routes from Russia – the Nord Stream undersea gas pipeline – is currently able to operate normally, with an annual capacity of 55 billion cubic meters of gas.

Gazprom last week refused to change the deal for transit supply through Ukraine after the Russian military took over a key pumping station in the Lugansk region.

Its operations were halted by the country’s transmission authority, operator GTS Ukrainy, with force majeure declared.

Operator GTS said on Monday that Gazprom is currently shipping about 53 million cubic meters per day of gas through the Sudzha gas pipeline hub in the Sumy region in the north of the country, against a contractual minimum of 109 MMcmd.

Executive director of operator GTS Ukrainy Sergey Makogon said the Sudzha hub serves three main routes from Russia and is capable of handling 244 Bcmd of Russian gas transit against Nord Stream’s 160 Bcmd capacity.

With the Russian refusal, Ukraine continues to adapt its trunk line network to new challenges, recently allowing gas transport from Poland to Hungary, Makogon added.

Is LNG a game-changer?

With increased liquefied natural gas tanker movements to Europe, the delta between European gas stocks and their five-year average fell to 9 bcm from 22 bcm earlier this year, according to Jefferies equity research analysts.

Gas reserves in storage appear to be on track to meet the European Union’s new minimum storage requirement of 80% of capacity by November, erasing a possible “geopolitical risk premium” in gas prices. spot gas for the coming winter, analysts suggested.

Gazprom’s possible refusal to operate the Yamal pipeline, which supplies gas from Russia through Belarus to Poland and Germany, has now been ignored by market participants, seeing the flurry of activity in Europe for organize alternative gas supplies.

The Polish oil and gas producer PGNiG announced on Monday that it had signed memorandums of understanding with the American Sempra Infrastructure for the delivery of 3 million tons per year of LNG from two liquefaction terminals in the American Gulf from of 2027.

According to PGNiG, these supplies are likely to enter the country’s pipeline network via a planned floating storage and regasification unit near the Baltic port of Gdansk in Poland.

PGNiG already has contracts for the supply of 7 million tpy of US LNG which provides more than 9 bcm of gas after regasification and entirely replaces Russian pipeline imports.

The company has reserved the full capacity of the country’s first terminal at Swinoujscie, allowing it to accept 6.2 billion m3 per year of gas after regasification, with a target capacity of 8.3 billion m3 per year after expansion scheduled for 2024.

PGNiG has also reserved capacity in the regasification terminal in Klaipeda, Lithuania, on the Baltic Sea, the company added.

The company has chartered eight LNG carriers, each with a capacity of 174,000 tonnes of liquefied natural gas, which will be built exclusively for PGNiG to transport LNG to the country and Europe.

The first two carriers will enter service next year, the next two – in 2024 and the remaining four – in 2025, the company said.

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