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The head of the Ukrainian state-backed pipeline company has called Russia’s refusal to send additional gas supplies to Europe a “blackmail”, with fuel prices at an all-time high over the past 13 years.
Sergiy Makogon, executive director of the Ukrainian gas transmission system operator, said he believed Gazprom of Russia was intentionally retaining supplies gas from Europe by refusing to send additional volumes through Ukraine, in an attempt to force approval of the troubled North Stream 2 pipeline running from the Baltic to Germany.
“[Europe] Gazprom should not follow this blackmail with prices, “Makogon told the Financial Times, arguing that Russia could have moderated the doubling of gas prices this year if it pumped more. Russia’s supplies are almost a fifth on pre-pandemic levels so far in 2021.
“[The supply tightness in Europe] it is an artificially created problem “.
Gazprom, which has a monopoly on Russian gas pipeline exports, on Tuesday refused to reserve additional volumes through Ukraine in a monitored monthly auction, aimed at boosting its exports to Europe, prompting a further rise in prices.
Gazprom, which has fulfilled its long-term contracts in Europe, declined to comment on the allegation, but last week said it was normal to “optimize” its gas flows and meet customer requests. Company executives have it previously indicated more gas will be available once Nord Stream 2 starts.
While the supply of Russian supplies is not the only reason for the rise in gas prices, with a long winter of depletion of storage and stronger global demand, executives and traders have questioned the reluctance of Gazprom to increase exports.
James Huckstepp of S&P Global Platts said Gazprom risked hurting the company’s desire to be seen as a reliable partner, especially as other Russian pipelines would have to be shut down for maintenance next month.
“Gazprom rules out reserving interruptible capacity in Ukraine during the period of maintenance of delivery routes in the north. . . they could jeopardize their claim to be the most reliable supplier in Europe, ”said Huckstepp.
An EU official said the commission “had no indications of specific behavior on the part of our suppliers to raise prices”.
“The current situation is a reflection of the dynamics of the global market. Now all EU regions have access to more than one gas source, so they are less vulnerable to supply compresses from an individual supplier, ”the official said.
Nord Stream 2 crosses the Baltic Sea to Germany and will be approved later this year, although the German elections in September could complicate the closure.
The pipeline, which is about to end, has been the target of sanctions by the US. It is also opposed by countries such as Poland, which believe it will give Russia additional influence over European energy supplies, undermining Ukraine by allowing Moscow to bypass the country.
Polish Foreign Minister Zbigniew Rau on Wednesday received German support for the pipeline and wrote to the Frankfurter Allgemeine Zeitung that “the completion of Nord Steam 2 will create a major security deficit on the eastern flank of NATO. and Ukraine will find itself in a security vacuum. “
Russia has long been looking for alternative transit routes to Ukraine. In 2014, Moscow annexed Crimea, a peninsula in the Black Sea, and has continued to support a war of representatives in the eastern territory of Ukraine.
Some analysts have said the shift to so-called interruptible contracts may have had an effect on the supply situation. These contracts, in theory, would allow Ukraine to withdraw supplies from Gazprom in favor of other customers.
“[That] it means Gazprom would have no guarantee of being able to deliver gas that would compromise buyers in Europe, ”said Laurent Ruseckas, an analyst at IHS Markit.
But Makogon said the interruptible contracts had been mutually agreed with Gazprom and that the Ukrainian TSO was happy to discuss firm contracts if that was what Russia wanted. “If Gazprom officially approached us and asked us,‘ do we make it firm, ’we would definitely consider it and define how to solve this problem,” Makogon said.
Makogon said Russia was ultimately threatening a supply crisis in Europe this winter, as storage facilities are usually refilled in the summer when heating demand is lower.
“Europe can get into winter with very serious problems,” Makogon said. “If Gazprom asks to pump more in August? We would just love to do it. ”
Additional reports from Mehreen Khan in Brussels
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