One week after Gazprom’s latest threats to end the Ukrainian transit, gas continues to flow as usual, gas transmission data show.
Gazprom CEO Alexei Miller raised the stakes in the gas transit dispute between Moscow and Kyiv by warning on Jul. 6 that the company could not rule out the possibility of Russia imposing sanctions against Ukraine’s Naftogaz, as Russia’s war in Ukraine continues.
However, Ukrainian transit flows remained stable in the days that followed, at slightly above 40 million cubic meters per day. The latest daily nominations were 42.4 MMcm/d for Jul. 11 and Jul. 12, according to data from Gazprom.
Gazprom already said in September 2022 that Moscow could impose sanctions against Naftogaz because of the transit dispute, which will force Gazprom to stop any interactions with the Ukrainian company and cut off the flows.
Miller’s repeating the threat last week might signal a political decision to prepare for the cutoff and/or attempt to put pressure on Europe and make it force Kyiv to drop the claims. Naftogaz’ efforts to move on with the arbitration case “signal its non-cooperative approach to ensuring the transit of Russian gas to Europe and a general hostile attitude toward Russia,” Miller said.
Nato Summit
Reducing European support for Ukraine is increasingly important for Moscow as the Nato summit gathered this week in Vilnius to discuss Kyiv joining the alliance. The first day of the summit on Jul. 11 showed there are divisions over Kyiv’s candidacy.
Gazprom will not take part in the arbitration dispute because it does not trust European courts to be impartial. That includes Switzerland, which has joined international sanctions against Russia, and Sweden, which wants to join Nato, Miller said.
He also pointed to Naftogaz’s recent motion filed with a US court to confirm an earlier $5 billion award that the arbitration in Hague ordered Moscow to pay in compensation for damages and lost property in Crimea because of Russia’s annexation of the peninsula in 2014.
Although the chances of Ukrainian transit being stopped sooner rather than later have increased, the immediate market reaction was quite restricted, reflecting the reduced influence of Russian supplies on European prices. Daily export volumes from Russia have dropped by nearly 80% since the beginning of the war in February 2022, and the general expectation on the market is that the transit could stop at any moment.
The front-month Dutch TTF gas futures contract closed nearly 6% lower on Jul. 6 at €32.35 per megawatt hour ($10.4 per million Btu), and although it increased slightly on Jul. 7, it continued to fall this week.
The Ukrainian transit keeps supplying a limited number of European markets — Slovakia, Austria, Slovenia, Italy and non-EU Moldova. OMV CEO Alfred Stern said in an interview with the Financial Times that the Austrian company would continue to import gas under Gazprom’s contract “as long as Gazprom will supply.”
“There is an obligation we have as an industrial company to ensure that we use those sources as long as they are legally acceptable,” Stern said. OMV was not making any plans to exit the long-term contract with Gazprom signed in 2018 and valid until 2040, he added.
Even if Gazprom doesn’t halt the Ukrainian transit anytime soon, it will likely stop at the end of 2024 when the current five-year deal expires.
Turk Stream Rises
Gas flows via the only other available route to Europe, the onshore continuation of the Turk Stream pipeline supplying the Balkan states and Hungary, continued to grow in July.
Average daily flows in July so far via the Europe-bound continuation of Turk Stream were 41.6 MMcm/d, up 13% from the last 10 days of June. They also exceeded the average Ukrainian transit flows of 41.5 MMcm/d in the first 10 days of July — something that hasn’t happened often this year (see graph).
Moscow wants to keep Turk Stream as a key export route to Europe and counts on the proposed Turkish gas hub to maintain and increase sales of Russian gas to the continent despite the major standoff between Moscow and the EU, which makes Russian piped gas imports toxic for many buyers in the region.
Kremlin spokesman Dmitry Peskov said on Jul. 10 that Russia will continue to work with Turkey on the gas hub despite Ankara violating a prisoner-exchange agreement by letting former Azov commanders who fought in Mariupol last year to return to Ukraine. The Azov issue has nothing to do with Russia-Turkey economic cooperation, according to Peskov.
He also said on Jul. 11 that Moscow understands Turkey’s decision to support Sweden joining Nato, as Ankara has its own obligations within Nato. He admitted that Russia and Turkey have disagreements, but said there is another part of bilateral relations which is mutually beneficial.
ENB Top News
ENB
Energy Dashboard
ENB Podcast
ENB Substack
The post Gazprom Keeps Taps Open Despite Transit Threats appeared first on Energy News Beat.