Well, yes. Almost overnight, Moscow turned off the gas supply for Poland and Bulgaria. Russia is primarily reacting to the support that many EU countries are giving Ukraine after the Russian attack. The end of gas deliveries naturally has consequences, for Poland and Bulgaria anyway, but also for the EU and Germany. Here are the most important questions and answers.
Why did Russia take this step?
No one can see inside Vladimir Putin’s head. But it is most likely a reaction to the recent decisions by many states to supply Ukraine with more weapons. There is also something second. A gas shortage is painful for many EU countries, but it’s even more painful for Russia when countries like Germany become less dependent on Russian oil. It is precisely this increasing independence that the German Economics Minister Robert Habeck made public in Warsaw on Tuesday. Within a few weeks, Berlin managed to reduce its dependency on the oil market from around 38 to 12 percent. Habeck said it was only a matter of “days” before this problem was solved. It is not unlikely that the Kremlin was very angry about this message – and that is why it is now taking this step.
Were the Poles prepared?
As far as possible in the case of surprises: Yes. Poland has been the most consistent attempt in the EU to reduce its dependence on Russian gas for years – for example with new pipelines to neighboring countries or to Norway, with a liquid gas terminal and topping up its natural gas storage facilities.
What does the gas supply freeze mean for Poland?
In the short term: nothing. Poland’s gas storage facilities are almost four-fifths full, a reserve for several months. But Russian natural gas – 10.2 billion cubic meters per year – accounts for half of Poland’s gas consumption. The litmus test won’t come until next winter, when it will show how much Poland can replace with deliveries from other pipelines and new LNG contracts.
How dangerous is all this for Bulgaria?
The poorest country in the EU gets about 90 percent of its natural gas requirements from Russia – so the delivery freeze will hit Bulgaria much harder than Poland. Prime Minister Kyril Petkov, who is expected in the Ukrainian capital Kyiv on Wednesday to discuss arms deliveries, is trying to avoid panic among the population: “I want to assure all Bulgarian citizens that they should rest easy: There is one thing that is clear plan. The European response will be a joint one.” Petkov promises that private consumers will not be affected by the gas shortage.
Was this a surprise to Sofia?
Bulgaria has long maintained closer ties to the Kremlin than other countries in south-eastern Europe, also because of its cultural, religious and linguistic proximity to Russia. But since the Russian invasion of Ukraine, sympathy for Russia among the Bulgarian population has plummeted. The current government led by Prime Minister Kyril Petkov is increasingly distancing itself from Moscow. Sofia has repeatedly expelled Russian embassy staff on allegations of espionage. So it was to be expected that Moscow would put more pressure on the country. Sofia has therefore been working for a long time to reduce its own dependence on Russian gas and to replace it with gas from Azerbaijan, for example, which already flows through an existing pipeline to Italy. Bulgaria’s southern neighbor Greece plays a key role, where new terminals for liquid gas from the USA, for example, are being built. A long-planned Bulgarian-Greek pipeline is now set to be completed with urgency and will go on stream in June.
How is the European Union reacting?
Commission President Ursula von der Leyen called the delivery stop on Wednesday “another attempt by Russia to blackmail Europe”. The EU is “prepared for this scenario” and a coordinated response is currently being agreed. The German pointed out that the Commission had previously sought “alternative sources of supply” and storage for the entire EU. In fact, the EU has agreed with the USA, for example, that significantly more liquefied natural gas should come from there by tanker this year. Von der Leyen said in a recent interview that the Commission had also spoken to Qatar and Egypt about increasing such deliveries. And Japan and South Korea, two important customers, are willing to forego deliveries in favor of Europe.
What if the delivery stop is final?
Should it continue and gas become scarce, the other EU countries will have to step in if necessary. The so-called SOS regulation of 2017 requires industry to be decoupled first so that households or hospitals can continue to heat – even abroad. If Poland’s gas storage facilities are empty in the fall, German industry might have to do without gas so that the energy source can be diverted to Polish thermal power stations. Von der Leyen said on Wednesday that the member states had drawn up emergency plans “in close cooperation with the Commission in solidarity”.
How dangerous is that for next winter?
A longer blockade would also make it more difficult to fill the storage tanks for the next heating season by autumn. It was not until March that the commission presented a law that stipulates minimum fill levels: by the beginning of November, the warehouses must be 80 percent full this year and even 90 percent full in the coming years. At the same time, the Authority suggested that interested Member States order gas together, in order to get the necessary quantities more cheaply. Governments should – on a voluntary basis – pool their bargaining power instead of outbidding each other. Such joint purchases have been possible in the EU since 2015, but this has not been used so far. The Commission now wants to simplify the procedure and set up a task force. Negotiation teams led by the Commission are to speak to suppliers of both natural gas and hydrogen.
When is the dependency over?
The EU Commission has given as a targetto become completely independent of gas, oil and coal imports from Russia by the end of 2027. By the end of this year, gas imports from the country should fall by two-thirds, which experts consider very ambitious. In all, the commission plans to replace 50 billion cubic meters of Russian gas with imports of LNG — the common abbreviation for liquefied natural gas — by the end of the year. A similar amount of Russian gas is to be eliminated as a result of the fact that the member states purchase more pipeline gas from other countries, reduce gas consumption for heating and quickly build more wind and solar power plants.
Can the Russian delivery freeze for Poland and Bulgaria drive the EU apart?
There is no evidence of this, and such a scenario is also very difficult to imagine. The Polish government always takes tough positions in the conflict with Russia, and the blockade will not change that. It is also unlikely that the gas stop will cause Bulgaria to deviate from the largely unified line of the EU. Especially since the EU wants to help Bulgaria. One problem, however, is that the country will only have a pipeline connection to Greece and thus to the rest of the EU in June. The biggest obstacle in the economic war against Russia is rather Viktor Orbán, the authoritarian Prime Minister of Hungary.
Is an EU oil embargo coming soon?
The Commission is expected to present proposals for the sixth sanctions package to member states in late April or early May. This could also include restrictions on oil imports from Russia. The fact that Germany can now do without this raw material more quickly makes such an advance more likely. However, unanimity is required for sanctions, and Hungary’s authoritarian Prime Minister Viktor Orbán describes an embargo on oil or gas as a “red line” for his government. The EU foreign policy chief Josep Borrell therefore only said at the weekend that the EU “currently does not have a unified position” on an oil embargo.
Could the EU at least threaten it more severely?
One problem is that an embargo announcement could drive up oil prices and thus gas station prices. This, in turn, could hurt French President Emmanuel Macron in June’s general election. The higher oil price could bring Russia even more income if the local companies manage to sell part of the quantities lost in Europe in Asia. That’s one of the reasons the US government is warning Europeans of a swift oil embargo. The EU Commission is aware of the challenge: “What shouldn’t happen is that Putin charges even higher prices for deliveries that otherwise go to the EU in other markets. That’s why we’re developing clever mechanisms,” said Ursula von der, head of the authority Leyen to. In Brussels it is considered likely that an embargo will distinguish between different types of oil from Russia – and also between oil delivered by pipeline and by tanker. Various transitional periods could apply here.
Are there alternatives to an oil embargo?
An alternative to an import ban could be a special tariff. Or the EU and other Western buyers join forces to form a buyer cartel and dictate lower prices to Russia. In this way, too, Putin’s income from the oil business could be reduced.
What would a gas supply stop mean for Germany?
Germany would plunge into an economic crisis. Many people would have to go back to short-time work, inflation would rise again significantly. Industrial locations would be particularly affected. It is estimated that the gross domestic product would collapse by around two percent compared to the previous year the Federal Bank, and then crash again in 2023 because the gas would not really be scarce until the winter of 2022/2023. If the gas continues to flow, the German economy would grow noticeably and recover from the Corona crisis. The leading economic research institutes are approaching a similar prognosis.
The estimates are scientifically sound, but of course still uncertain – the Federal Republic has never experienced a gas economic crisis. The more gas comes to Germany from other sources and the better government aid then really mitigates the consequences, the lower the economic damage. However, if things go badly, the worst case scenario will occur – and the economic crisis will be even worse than already forecast.
Economic output would collapse the most in the districts with automobile and chemical production: The economic pain would be greatest in Wolfsburg, Ingolstadt, Salzgitter Ludwigshafen, Dingolfing-Landau and Böblingen, appreciate economists.
What are German gas traders expecting now?
Large importers, above all Uniper, do not want to conclude any new, long-term gas contracts with Russia. But they hope that they will still receive already agreed amounts in the coming months. There are no signs of a break in supply relationships, said Uniper board member Niek den Hollander on Wednesday. “This will not affect transit shipments through Poland.” To date, Uniper has been one of the largest customers of the Gazprom Group. The former Eon subsidiary operates gas-fired power plants itself, but also sells the fuel to municipal utilities or industrial companies.
How are gas traders reacting?
Uniper is now trying to meet Moscow’s requirements, according to which gas can initially still be paid for in euros or US dollars, but the money must be exchanged for rubles in Russia. After an initial legal review, the company says it thinks this is possible, even without breaking EU sanctions. Of course, the Düsseldorfers still have some time: their next payment is due at the end of May, says Uniper CFO Tiina Toumela. We are in close contact with the federal government in this regard.