The dreaded gas war has begun. Not even a day after the bilateral of Mario Draghi and Joe Biden, in which the Italian prime minister spoke of peace, the war in Ukraine changes pace and the threats of a blockade of Russian supplies seem increasingly real. After the stop flows to the entry point of Sokhranivka, in Ukraine, and the cessation by Gazprom of the use of the gas pipeline Yamal Europe, which carries the blue gold from Russia to Europe via Poland, the Old Continent is increasingly committed to finding a plan B in case of sudden interruptions. A retaliation by Moscow against the European sanctions, probably intensified by the announcement of Finland to join NATO, which is why there is also fear of a stop in supplies to Helsinki. Already last April 26 Moscow had blocked exports to Poland and Bulgaria because they are against the payment of methane in rubles. In all this, the counter-sanctions and the reduction of the Russian flow are driving the gas prices and risk further encumbering the debate on the sixth package of sanctions.
The gas war: the back and forth between Russia and Ukraine
The first stop to gas flows to Europe arrives. On Wednesday 12 May, Ukraine announced that it could not pass gas through the station near Sokhranivka, in the Lugansk region - through which almost a third of the methane destined for Europe passes every day - due to the presence of the Russian Armed Forces. The Novopskov border compressor station on the pipeline is also stopped Soyuz, strategic transit point for Slovakia, Hungary, Austria, Romania and Italy.
Ukraine has therefore asked the Russian government-controlled energy giant to increase volumes at another site, Sudhza. Moscow for its part argues that it is impossible to move all the volumes to another pipeline and that there are no dangers recommending doing so. But the Ukrainian gas operator (Gtsou) denied Gazprom's statements, underlining that already in October 2020 "for work on the Sokhranovka section, there had been a detour to Sudhza". However, it remains capacity node: flows through Sokhranovka are equal to 23 million cubic meters per day, while Sudzha station has a lower total capacity of about 13 million.
Overall, according to the Russian oil giant, flows dropped by a quarter yesterday (72 million cubic meters on Wednesday 11 May, down from 95,8 the previous day).
As far as our country is concerned, Italy has not encountered any problems, the gas supply has been compensated from the North to Passo Gries, as Snam announced.
But it doesn't end there. In response to the sanctions, Moscow has decided to sanction 31 energy companies from EU countries, the US and Singapore. Among these is also the Europol Gas, the company that owns the Polish section of the Yamal-Europe pipeline, which connects Russia's Yamal peninsula and western Siberia to Belarus and Poland, to reach Germany. For this reason, Gazprom has decided to stop sending gas through the Polish pipeline. It is a strategic gas pipeline that guarantees supplies for about 33 billion cubic meters, or a sixth of Russian exports to Europe.
Finland in NATO: risk being stopped by Moscow?
One of Putin's worst nightmares is closer to becoming reality: after 70 years of "strategic neutrality", the Finland has knocked on NATO's door, along with Sweden, which could announce the request on Monday. An important turning point in the war between Russia and the West triggered by the invasion of Ukraine to prevent NATO from extending to the East.
According to the Finnish newspaper Iltalehti, Finland's main political leaders have been informed that Moscow could cut gas supplies, underlining however that the possibility of an interruption on May 23 had previously been raised, on the occasion of the next payment by of Helsinki for Russian gas, which Moscow expects to be in rubles. But Helsinki's confirmation is still missing on the hypothesis and although the Kremlin has defined the news of the alleged stop as a "hoax", we have learned to be wary of his statements.
Austria threatens to confiscate the plant from Gazprom
If Gazprom does not fill the Salzburg storage facility, the largest in the country and the second in central Europe, with gas, Austria is ready to confiscate it and make it available to other suppliers. The Austrian chancellor said so Karl Negammer in an interview with the Kronen Zeitung taken up by European Truth.
Russian media had previously reported Vienna's willingness to pay for the gas in rubles. However, Chancellor Negammer denied the fact, calling the news disclosed a "false Russian propaganda". “Obviously, OMV will continue to pay for gas supplies from Russia in euros. Austria strictly adheres to the agreed EU sanctions,” he reiterated.
This opens up the possibility of a cut in supplies, for which Austria is not yet ready either.
Gas prices rebound
Gas prices are increasingly affected by the war. After yesterday the benchmark index, futures in Amsterdam, reached a peak of 111 euros per MWh (+17,5%) today the price of gas in Europe started down, only to recover in the middle of the day. The reference index of the spot price, i.e. futures in Amsterdam, move around 106 euros per MWh, marking an increase of 13,5%.
The EU contingency plan in the gas war
The European Union is preparing for a possible escalation in the gas war. According to the Agi news agency, the main elements of the emergency plan that emerge in the draft of RepowerEu there are: consumption rationing, solidarity between the affected EU countries, price caps and measures against speculation.
The document that will be made official on 18 May mentions the "case of further gas interruptions affecting several Member States at the same time": a case in which the Union expects to be able to adopt "necessary additional measures usefully integrated with coordinated rationing and a reduction of demand on the basis of EU-wide principles during an emergency where gas markets no longer optimally match demand and leave residual demand unsatisfied”.
"Based on the principle of solidarity, a reduction in gas demand in the least affected Member States should be considered for the benefit of the most affected Member States", indicates the European executive.
But if this were not enough, the Commission opens up the possibility of set a ceiling on the price of gas. “Such an EU price cap in a severe disruption scenario would have the advantage of limiting the harmful price effects of the disruption for consumers and businesses to pre-set levels. But it would also present its own set of challenges.”
“It should be ensured that the introduction of such a ceiling does not worsen the EU's access to gas and LNG supplies, which will be vital in such a scenario as any reduction or limitation of supply in an emergency situation would further deterioration. It would also automatically limit the potential for price-driven reductions in gas demand, with a negative impact on the balance between supply and demand,” the Commission underlined.
However, we are in a complex scenario even without a total supply disruption from Moscow. To face the expensive-bill, the Commission proposes "an extension of the taxation of extra profits and a more stringent regulation against the volatility of stock market prices, driven by speculation". It may be necessary to “review internal trading rules”. The revenues "can help finance targeted and temporary measures to support vulnerable households and businesses". Those measures could “be extended beyond June 30, 2022, to cover the next heating season,” concluded the executive in the plan.
