Gazprom’s announcement on Tuesday that it would suspend natural gas supplies to Poland and Bulgaria is not likely to have a major impact on the overall European gas market, analysts say. But it comes as a warning that further, more serious cutoffs of fuel from Russia could be in the offing as the war in Ukraine grinds on.
The move “increases the risk of other early terminations for other European contracts,” wrote Giacomo Romeo, an analyst at Jefferies, an investment bank, in a comment.
The cutoff is the first suspension of supplies to European countries since the war in Ukraine began in late February. Gazprom, the Russian gas monopoly, said in a statement that it was acting because the Bulgarian and Polish gas companies had not met President Vladimir V. Putin’s demands that they pay in Russian rubles for gas supplied since April 1.
For Europe, the gas stoppage comes at a good time, if there is such a thing. With the spring weather turning warmer, gas consumption, which surges in the winter, is in decline, easing some of the pressure that has kept prices elevated for months.
In a note to clients on Tuesday, analysts at Goldman Sachs said that they expected the Russian cutoffs to “have only a modest physical impact” on the supply and demand balances in the key northwest European market.
Despite such assurances, the Russian move led to a surge in European natural gas futures prices on Wednesday — they opened more than 20 percent higher on the Dutch TTF exchange, to 125 euros (about $133) per megawatt-hour. The prices eased later in the morning.
Poland will most likely be buffered from the Russian cutoff in the coming months. It has been taking in only modest amounts of gas from Russia through the Yamal pipeline, which Gazprom is cutting off, this year. Indeed, the pipeline has often been running in reverse, bringing gas from storage in Germany to Poland.
Unlike some other European nations, Poland has been working for at least a decade to avoid being held to ransom by Moscow over energy. This preparation means that Warsaw has other options for obtaining gas, including a liquefied natural gas terminal that the country built to reduce its dependence on gas from Russia. The facility allows Poland to import fuel from suppliers like Qatar and the United States. In addition, a new pipeline bringing gas from Norway under the Baltic Sea is expected to come online later this year.
Poland has also been putting gas into storage facilities that are now more than 75 percent full, more than double the European average.
In a statement on Wednesday, PGNiG, the dominant Polish energy company, said that it had “various possibilities of obtaining” gas, including from Germany and the Czech Republic.
PGNiG said that by stopping gas flows, Gazprom was breaching its contract. The Polish company said that “after a thorough analysis” it had decided that paying in rubles was not consistent with the terms of its contract.
Bulgaria also maintains that it has met its legal obligations and that gas is being used “more as a political and economic weapon in the current war,” said its energy minister, Alexander Nikolov. While heavily dependent on Russian gas, Bulgaria is a minnow in terms of overall European consumption of the fuel, analysts say.
The cutoff could presage other more damaging fuel cutoffs if the war continues and if customers like Germany, the largest importer of gas from Russia, don’t negotiate a solution to the Kremlin’s demands for ruble payments.
“It is in the interest of both the EU and Russia to work out a solution” the Goldman analysts wrote, warning that a larger suspension of gas could lead to a “significant economic toll.”