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The move marks a significant escalation in the economic conflict between Russia and the West, and the most serious response yet by Moscow to several rounds of European sanctions announced since Putin ordered an invasion of Ukraine in February.
European Commission President Ursula von der Leyen said the suspension amounted to “blackmail”. She said EU member states met on Wednesday for emergency talks, and that some had already begun sending gas to Poland and Bulgaria.
“The era of Russian fossil fuels in Europe will come to an end. Europe is moving forward on energy issues,” it said in a statement.
Poland and Bulgaria may be able to cope, but if Russia cuts off supplies to other EU countries, especially Germany and Italy, Europe’s preparations will be sorely tested. The G7 economies said they intended to continue paying for gas in euros or dollars.
Can Europe cope?
According to the European Commission, the bloc relies on Russia for about 45% of its natural gas imports. Gas storage facilities in the European Union are about 32% full, according to Gas Infrastructure Europe. That is well below the 80% target the bloc set for its member states by November.
Analysts at Berenberg expect Europe to arrive in late autumn before it starts to run out of gas if Russia suddenly cuts supplies.
But the bloc moved quickly to find alternative supplies and reduce demand.
“This latest aggressive move by Russia is another reminder that we need to work with reliable partners, and build our energy independence,” von der Leyen said on Wednesday.
PGNiG, Poland’s state gas company, said on Tuesday that its underground gas storage was nearly 80% full. And gas flows along the Yamal pipeline – the delivery route cut by Russia – were already declining.
“[Gas via Yamal] It accounts for less than 2% of Russian pipeline shipments to Europe since the start of the year, Karsten Fritsch, energy, agriculture and precious metals analyst at Commerzbank Research, wrote in a note on Wednesday.
Fritsch added that Poland’s willingness helps explain the market’s modest reaction.
Gas futures prices in Europe jumped 24% early Wednesday morning, but have since fallen back to trade just above the monthly average for April of 100 euros ($106) per megawatt-hour, according to data from the Commodity Intelligence Services. independent.
“Poland’s strategy to move away from Russia has proven correct,” Rystad Energy analysts Kushal Ramesh and Nicolin Brumander wrote in a note.
“Currently, no restrictive measures have been imposed on gas consumption in Bulgaria,” the Energy Ministry said in a statement.
What about Germany?
But the damage that a sudden gas cut could do to Germany is the biggest concern.
A sudden interruption of the main energy source could reduce production and exports and threaten the survival of many small and medium manufacturers in the country.
“If we lose Nord Stream 1 across the Baltic Sea to Germany, it will be a huge crisis,” Ole Hvalby, a natural gas analyst at Sweden’s SEB bank, told CNN Business.
Henning Gloystein, director of energy, climate and resources at Eurasia Group, told CNN Business that under significant Russian supply cuts, Germany and Italy — which depend on Russia for about 41% of their gas needs — could avoid rationing next winter if they act quickly.
“[Germany and Italy] They need to try to reduce gas consumption structurally by replacing domestic boilers with alternative systems such as heat water pumps and requiring households to use less gas for heating or cooling.”
“European utilities will need to enter the LNG market and order as many tankers as possible in the coming weeks and months,” he added.
– Sugam Pokharel, Claire Sebastian, Svetlana Budjak Jones and Hannah Ritchie contributed to this report.
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