Russian state-controlled monopoly Gazprom reduced gas exports to Germany this week via Belarus and Poland, triggering a staggering 32% increase in front-month spot gas futures contracts at a trading hub in the Netherlands within two days and drawing fresh criticism from European diplomats.
The contract for delivery of gas in January 2022 was hovering north of $2100 per thousand cubic metres (€182 per megawatt hour) on Tuesday afternoon, compared to $1650 per thousand cubic metres at the end of the last week when reduced Russian supplies had yet to take effect.
German transmission operator Gascade indicated in its transparency platform that gas flows via the Yamal pipeline to Germany fell to about 34,000 cubic metres per hour on Monday, against 1.1 million cubic metres per hour last week.
Supplies from Russia stopped completely at 7am on Tuesday, according to the operator.
The upward move in gas prices is based on the continued uncertainty about whether the reduction is permanent or just temporary, as Gazprom has remained silent on the decline.
Expectations of a permanent reduction in Russian gas supplies to Europe are linked to a growing understanding in Moscow that German authorities remain deaf to Russian public pronouncements on providing a speedy approval to Gazprom’s controversial subsea gas export pipeline, Nord Stream 2.
Additionally, Ukraine's gas pipeline operator said that Gazprom has not booked any additional transit capacity to Europe across the country for January when demand for gas in Europe is at its peak.
However, some political observers in Moscow also expressed hopes that the fall in Yamal pipeline supplies may only continue for several days because Gazprom is diverting gas from the pipeline to fill the second line of Nord Stream 2, which runs for 1200 kilometres across the Baltic Sea between Russia and Germany.
“Similar to the first pipeline, the second pipeline will be gradually filled with gas to build the required inventory and pressure," said Nord Stream 2's Switzerland-based operator in a statement.
The first line of the newly built pipeline system was filled with gas in October when Russian gas supplies via the Yamal pipeline to Germany also experienced severe daily fluctuations.
However, these fluctuations never before fell to such a low hourly level as happened this past weekend.
Gazprom has now started to fill the second line despite last week’s pronouncement from Jochen Homann, president of Germany’s Federal Network Agency, that the agency expects no decision on the certification of Nord Stream 2 during the first half of 2022.
Borrell toughens stance
Adding pressure on the Kremlin were new statements from European Union High Representative for Foreign Affairs & Security Policy, Josep Borrell, who blamed Russia for using natural gas “as a tool for political influence” in his official blog.
While Gazprom is “strictly speaking fulfilling its [minimal contractual] commitments on gas supplies [to European customers], many see its current refusal to increase export volumes to Europe or to refill Gazprom-owned storage facilities [in Europe] as a means to exert pressure on the EU and specifically to secure the regulatory licensing of Nord Stream 2”, Borrell wrote.
Backing Poland’s stance of viewing Nord Stream 2 via the prism of joint European energy solidarity, Borrell said: “No one can increase their own security without taking into account the security of the whole (European) Union, which should be a basic principle to make the EU stronger and counter attempts to divide us”.
This February, Borrell attempted to rebuild bridges between the EU and Russia, flying to Moscow to meet with top Russian governmental officials despite strong criticism from fellow EU diplomats.
Besides Ukraine, Poland has been strongly objecting to Nord Stream 2 on the grounds that the project will only increase European dependence on Russian gas supplies.
* Article updated with latest gas prices.
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