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Europe: Hourglass empties to find alternatives to Russian gas – Which countries are most at risk?

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Just 24 hours after Ukraine cut off gas flows from its territory to Europe, blaming Moscow for Russian military intervention, Gazprom suspended supplies via the Yamal-Europe pipeline that crosses Poland and stopped sending gas to a distributor in Germany.

Although the quantities affected are small, representing only a percentage of total consumption Europe, every blow to supply underscores the region's vulnerability and the European Union's urgent need to free itself from Russia's vast energy reserves.

As if they were in a state of emergency

“Now that we are starting to see these different issues emerge, this is a picture of why Europe should not take gas supplies for granted.” Simone Taliapetra, senior associate of the think tank Bruegel, told CNN Business. Governments must now act as if they are in a state of emergency, he added.

Russia imposed sanctions on 31 foreign companies on Wednesday, according to the state-run RIA Novosti news agency. Gazprom Germania and EuRoPol Gaz, the management company for the Polish section of the Yamal-Europe pipeline, were on the list.

“There will be no relations with these companies, they are just banned,” Kremlin spokesman Dmitry Peshkov said on Thursday.

“Alternative supplies have been secured”

< German Economy Minister Robert Habeck - whose country is a major buyer of Russian gas - has said that Russia no longer supplies Gazprom Germany's subsidiaries, but that alternative supplies have been secured.

The futures prices for the Dutch gas, the European benchmark, rose slightly by 14% on Thursday morning, but have since fallen, according to the Intercontinental Exchange.

Developments show a growing boldness of Russia to disrupt its energy exports to Europe.

Last month, Moscow shut down canals to Poland and Bulgaria, fulfilling a promise by President Vladimir Putin to cut off gas supplies to “unfriendly” countries that refuse to pay their bills in rubles instead of euros. or the dollars listed on their contracts.

In 2021, Russia accounted for about 45% of Europe's total gas imports. The European Union proposes to reduce Russian gas consumption by 66% by the end of the year, but has not yet presented a detailed plan on how to do so.

Ukraine shuts down taps

Even as the war raged for more than two months, gas from Russia continued to flow westward, largely through pipelines to Ukraine. But late Tuesday, the operator of Ukraine's gas transmission system said it had suspended gas shipments through the Sohranifka transit point, which processes up to 32.6 million cubic meters a day. This is about a third of Russia's natural gas flowing through Ukraine to Europe.

The Ukrainian administrator spoke of “interventions by the occupying forces” to announce the suspension of the route. He accused the Russian forces of violating the crossing point and sucking natural gas. As a result, the administrator said that the “stability and security of the entire Ukrainian gas transmission” had been jeopardized and had to suspend gas flows.

It was unclear when gas flows would resume of Sochranifka, notes CNN.

What is the impact of the closure of Sochranifka

The wider impact is limited so far. While Ukraine transports about 30% of Russia's total gas supply to Europe, according to the Independent Commodity Intelligence Services, the pipeline affected accounts for only 2.3% of Europe 's total gas supply.

< The moderate market reaction is largely due to sound levels of natural gas storage under normal conditions and the record volume of liquefied natural gas imports to Europe last month, said Tom Marzek-Manser, head of ICIS 'gas analysis department. "

” The market is actually quite well stocked right now, with all the data in mind, “he said.

But the disruption raises the unpleasant prospect of further disruptions to Europe's gas supply as fighting continues. The consequences could shake markets and send already rising energy prices even higher.

Redirecting gas flows

The Sohranifka shutdown creates a shortage of 16 million cubic meters a day, said Katerina Filipenko, a key analyst for global gas supplies to Wood Mackenzie. But “there is enough physical capacity to fully compensate for this outage,” he told CNN Business. is called Suja, which is further west in territory controlled by the Ukrainian government.

But Gazprom has refused to block further flows along this alternative route – saying it would be “technically impossible”.

Nevertheless, Filipenko said the impact would be small and Europe would has yet to achieve almost its gas storage targets for later this year, he said.

The EU's gas storage facilities are about 37% full, according to Gas Infrastructure Europe. This is almost normal for the time of year, but it is far from the 80% target set by the Union for November.

Further deactivations?

However, with the war raging, further closures of major thoroughfares cannot be ruled out, analysts say.

Tensions could escalate further next week as more European energy companies make payments to Russia for gas, Taliapetra told Bruegel.

“We are still waiting for the EU Commission to say whether the payment in rubles is a breach of sanctions or not,” he added. “So during the next two weeks we could see potential outages happening, we can not take gas supply for granted.”

Kosal Rames, gas and LNG analyst at Rystad Energy, told CNN Business that the European Union should form a buyer alliance, in which countries will jointly supply gas supplies from all suppliers, “as soon as possible” , in order to prevent countries from competing for the same gas supplies and raising prices.

Which countries will face bigger problems?

The countries of Central and Eastern Europe will be most directly affected by the reduction in flows Germany's gas through Ukraine, according to a research note from consulting firm Eurasia Group.

Germany, the Union's largest economy, is heavily dependent on Russian gas but is relatively isolated since its last Sohranifka. Most of the gas it imports from Russia is transported via the Nord Stream 1 pipeline via the Baltic Sea, Economy Ministry spokeswoman Susan Angrad told CNN on Wednesday.

Source: politis.com.cy

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