Natural-Gas Prices Jump in Europe After Russia Sanctions Energy Companies

Natural gas prices in Europe edged higher on Thursday, a day after Russia announced a series of sanctions against energy companies operating on the continent that could further threaten supply.

Among the companies sanctioned by Moscow are the former subsidiaries of Russian state gas giant Gazprom PJSC in the European Union and the Polish owner of a key pipeline. The restrictions could reduce Europe’s flexibility to import Russian gas through routes outside Ukraine, analysts say, although the full impact on gas supplies remains. unclear.

One target of Russia sanctions is Gazprom Germania GmbH, a major Gazprom unit that the German government took control of last month. German Economy Minister Robert Habeck said on Thursday that while some Gazprom Germania subsidiaries have stopped receiving Russian gas due to sanctions, the companies have found non-Russian alternatives. Russia.

Dutch gas futures, the benchmark in Northwest Europe, rose 11% on Thursday, while gas prices in the UK rose 15% and German electricity prices rose 11%. Although gasoline prices are below their March highs, they are still four times higher than a year ago, adding to inflationary pressures that are pushing central banks to tighten monetary policy.

Increasing prices further, the amount of Russian gas flowing through Ukraine to Europe has fallen by almost a third. Just over 53 million cubic meters of gas were booked to travel on the route on Thursday, down from 73.4 million on Wednesday. It is not possible to determine what caused the drop in exports to Ukraine. Analysts say it may be unrelated to Moscow’s sanctions, but instead to reduce Russian gas demand among Gazprom’s major customers in Western and Southern Europe.

Under agreements reached years ago with Russia’s state-owned producer, utilities and other customers must pay for the gas traded a month ago. Prices were then higher than they are in the European spot market, prompting European operators to instead suck in more gas directly from Gazprom.

European energy prices first began to rise last fall, as global supplies of natural gas dried up. They surged again after Russia invaded Ukraine on February 24, waging a war that has caused great uncertainty over energy supplies to a region long accustomed to fuel use. cheap Russian fossils.

Late on Wednesday, Moscow announced sanctions against 31 energy companies, including Gazprom Germania and EuRoPol GAZ, owners of the Polish section of the Yamal-Europe pipeline carrying Russian gas to Germany. Other targets include Astora GmbH, a gas storage operator, and Wingas GmbH, a trading company. Both are subsidiaries of Gazprom Germania. Tom Marzec-Manser, a gas analyst at ICIS, said the sanctions against Germania and its subsidiaries appear to be largely symbolic, with little practical effect on supply. gas supply. However, he said that sanctions on EuRoPol could prevent Berlin from importing Russian gas through the Yamal-Europe pipeline.

“You are limiting your routes to the market,” said Marzec-Manser. “That really poses a supply risk.”

The three pipeline companies in Germany were not named in the decree outlining the sanctions, suggesting Moscow may be trying to maintain its ability to export gas to customers in the Netherlands and other markets.

The Yamal-Europe pipeline is one of three main routes for Russian gas to Europe, along with the Nord Stream 1 undersea pipeline and Ukraine transshipment pipelines. It has rarely been used in recent months, but could prove vital in securing gas supplies to Europe if Ukraine’s backbone lines are hit or damaged or closed.

Currently, Russian gas continues to flow through Ukraine despite the war. However, tensions between gas companies in the two countries are running high, raising fears in Europe that the route could be cut. Ukraine closed one of the main entrances to Russian gas entering its territory en route to Europe on Wednesday, due to Russian forces meddling in the network.

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Edmund DeMarche

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