The tea does not subsideEuropean energy earthquake. Two important pieces of news emerged on Tuesday 26 April. The first comes from Germany which has announced that "in days" it will be able to give up on Russian oil. The second, even more disruptive, comes from Russia which has decided to cut off gas supplies to Poland and Bulgaria. Indeed, Gazprom turned off the taps starting at 8 this morning, Wednesday 27 January.
Germany and Russian oil
“Within days,” Germany will find ways to replace oil from Russia with imports from other sources. This was announced by Economy Minister Robert Habeck, adding that the country could then support an EU embargo on Russian oil imports. “Today I can say that an embargo (on Russian oil) has become manageable for Germany,” Habeck said, explaining that until two months ago Russian oil accounted for about a third of Berlin's oil imports. Today crude oil from Moscow accounts only 12% of German supplies and goes entirely to the Pck refinery in Schwedt near Berlin. “Schwedt's business model is based on buying Russian oil. This is a problem to be solved, we need an alternative for Schwedt (owned by the Russian company Rosneft ed.), and we will work on it in the next few days,” said Habeck.
The gas stop in Poland and Bulgaria
Russia's first real reaction to the economic sanctions imposed by the West has come. On Tuesday 26 April, the state-owned company PGNiG announced that it had received a communication from Gazprom, the Russian energy giant, regarding the suspension of gas supplies. The decision also affects Bulgaria and was "justified" by refusal of the two countries to pay for the gas in rubles, despite last week the EU Commission gave member states the green light to open sub-accounts in rubles without violating the sanctions. Warsaw has already announced its intention to take legal action, considering the stop "a breach of contract".
What will be the consequences of the stop? Poland should succeed in contain the economic and social impacts of the decision, at least in the short term. For years, the country led by Morawiecki has reduced its dependence on Russia, once equal to 100%, and, pending the already planned opening of new pipelines, Poland will resort to stockpiles, 76% full and to LNG arriving from other countries. "This is a turning point, which Russia today has only accelerated," said Piotr Naimski, head of energy infrastructure in the country.
The stop could instead create many problems for the Bulgaria, which imports about 90% of its gas from Russia and which today can only count on inventories equal to 17%.
EU countermeasures
“Gazprom's announcement is another attempt by Russia to blackmail us with gas. We are prepared for this scenario. We are plotting our coordinated EU response. Europeans can trust that we stand united and in solidarity with the affected member states." The president of the EU Commission wrote on Twitter, Ursula von der Leyen.
“We are plotting ours coordinated EU responsevon der Leyen continued after announcing that a meeting of the Gas Coordination Group is underway. “We will also continue to work with international partners to secure alternative flows.”
However, there may not be any of these alternatives Norway, a key supplier for the EU which in 2020 exported more gas to the bloc than any country other than Russia. The giant Vaar Energi has in fact made it known that it cannot immediately increase gas production. The company said it is currently producing as much natural gas as possible and does not expect to further increase its production in the near term.
Meanwhile the EU has given the green light to Spain and Portugal to impose a cap on gas prices. The cap will be 40 euros per megawatt hour and will rise to 50 euros per megawatt hour over the course of the year.
“We will continue to fight in Europe with all our strength – Foreign Minister Luigi Di Maio commented on Facebook -. Immediately a European ceiling on the price of gas, to protect families and companies against speculation that we will not allow”.
The market reaction
Oil moved little on the markets, with the price of Brent slightly up in June to 104,39 dollars a barrel (+0,38%). On the other hand, the price of natural gas soars, rising by 16% in Amsterdam to 119,75 euros per megawatt hour.
