Russia warns Poland of gas supply cuts on Wednesday

Russia warns Poland of gas supply cuts on Wednesday

A worker checks pipes at a gas compressor station on the Yamal-Europe pipeline near Nesvizh, some 130 km (81 miles) southwest of Minsk December 29, 2006.REUTERS/Vasily Fedosenko/File Photo

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  • Russia demands ‘unfriendly’ countries to pay for gas in rubles
  • Russia has threatened to cut off gas unless the demand is met
  • Kremlin says Gazprom is working on the scheme
  • Only a few have agreed on the gas-for-roubles scheme

WARSAW, April 26 (Reuters) – Russian energy giant Gazprom (GAZP.MM)has told Poland’s PGNiG (PGN.WA) it will halt gas supplies from Wednesday morning, the Polish state-controlled oil and gas company said in a statement on Tuesday , in a major escalation of Russia’s broader row with the West over its invasion of Ukraine.

Poland would be the first country to have its gas cut off by Europe’s main supplier since Moscow started what it calls a military operation in Ukraine on Feb. 24. The move to cut off supplies also followed sanctions imposed by Warsaw against Russian individuals and companies.

Russian President Vladimir Putin has demanded that countries he terms “unfriendly” agree to implement a scheme under which they would open accounts at Gazprombank and make payments for Russian gas imports in euros or dollars that would be converted into rubles, following what Moscow calls a ” special military operation” in Ukraine.

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He had threatened to cut gas supplies in case the demands would not be fully met.

Poland, a staunch Moscow’s political opponent, whose gas deal with Russia expires at the end of this year, has repeatedly said it would not comply with the new scheme of gas payments. It has also said it would not extend the contract.

It also did not extend its gas transit deal with Gazprom in 2020. Since then, the Russian gas provider had to take part in auctions for pipeline capacity via the Yamal-Europe pipeline from Belarus to Poland.

Poland’s gas supply contract with Gazprom is for 10.2 billion cubic meters (bcm) per year, and covers about 50% of national consumption.

Earlier, data from the European Union network of gas transmission operators showed physical gas flows via the Yamal-Europe route had halted, but they resumed later on Tuesday.

Poland’s energy supplies are secure, Poland’s climate ministry said on Tuesday, adding that there was no need to draw from gas reserves and that gas to consumers would not be cut.

With gas storage of 3.5 bcm 76%-filled and as several alternative supply routes are available, Poland will not have to cut supplies to customers to cope with Gazprom supply halt, government officials said.

The country can source gas via two links with Germany including a reverse flow on the Yamal pipeline, a link with Lithuania with an annual capacity of 2.5 bcm that will open on May 1 and via an interconnector with the Czech Republic for up to 1.5 bcm.

Another 5-6 bcm could be shipped via a link with Slovakia to be opened later this year.

In addition, PGNiG can import up to 6 bcm per year via the LNG terminal in Swinoujscie on the Baltic Sea, and it produces more than 3 bcm of gas per year locally in Poland. In October, a pipeline allowing up to 10 bcm of gas per year to flow between Poland and Norway, will be opened.

Gazprom said on Tuesday that Poland would need to begin making payments under a new scheme as of Tuesday. It did not elaborate and did not comment on PGNiG’s statement about the possible gas supply stoppage.

Only a few Russian gas buyers, such as Hungary and Uniper (UN01.DE), Germany’s main importer of Russian gas, have said it would be possible to pay for future supplies under the scheme announced by Moscow without breaching European Union sanctions.

The Kremlin said Gazprom was implementing the presidential decree on enforcing payment for gas supplies in roubles. read more

PGNiG said on Tuesday it would take steps to reinstate the flow of gas according to the Yamal contract and that any halt of supplies was a breach of that contract.

It added it has the right to pursue damages over breach of contract.

Earlier Tuesday, Poland announced a list of 50 Russian oligarchs and companies, including Gazprom, that would be subject to sanctions under a law passed earlier this month allowing their assets to be frozen. The law is separate from sanctions imposed jointly by EU countries.

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Reporting by Alan Charlish, Joanna Plucinska, Marek Strzelecki, Marwa Rashad and Nora Buli, Editing by Rosalba O’Brien and Marguerita Choy

Our Standards: The Thomson Reuters Trust Principles.

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