The threat of cutting off gas supplies, if not being paid in Rubles, is taking another casualty. Russian gas giant Gazprom has announced that it will stop gas supplies to the Netherlands by Wednesday, in a reaction to the refusal by Dutch energy trader GasTerra to pay in rubles.
Gazprom’s move was widely expected following Russian President Vladimir Putin’s announcement that all European gas deliveries should be paid in rubles. In a reaction, Dutch GasTerra stated that it already secured supply from elsewhere. The cancellation of the current contract is slated to be for the period May 31 – October 1 2022, entailing around 2 billion cubic meters of natural gas, or around 5% of Dutch annual consumption. No specifics have been given by GasTerra where it has bought other volumes, but it seems to be either gas from Norway or LNG.
Dutch Minister of Energy and Climate Rob Jetten said that the effects of the Russian move are almost nil, as there is no threat to any crucial physical gas deliveries. This means that Dutch consumers will still be able to use natural gas as usual. Still, it seems as if the Dutch minister is now again dismissing growing fears of not only increased shortages on the market, but also another inflationary push as wholesale gas prices will increase substantially. Dutch consumers will see their bills rise as a result. Based on Dutch law, in times of energy shortages, such as the current natural gas crisis, volume reductions will occur first in several energy-intensive industries, lifting prices in a market that is already grappling with supply chain issues.
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The Dutch government and GasTerra’s views that Gazprom’s move to cut supply does not have a major impact on the Dutch economy may be short-sighted. Russia’s move will make European gas markets even tighter as Dutch importers will now be looking for alternative supplies in an already crowded European gas market. At the same time, Gazprom has now shown that it is willing to also target large-scale gas clients in NW-Europe. The GasTerra move is a major one, as Dutch-Russian gas links are deep and historically strategically very good. A full confrontation with major gas importers seems imminent, and other Western European countries should brace for a possible supply cut.
The Dutch are now being made a prime example of Russia’s weaponization of energy. Gazprom’s move is based on Putin’s strategic considerations, as the Netherlands is a crossroads for European gas storage and infrastructure.
The Dutch position shows that not all importers are as flexible as German or Austrian importers. GasTerra’s refusal to pay in rubles, even via a possible financial construction at Gazprombank in Luxemburg, is showing the commitment of the Dutch government not to bow to Putin’s pressure. Moscow is upping the ante, after already blocking gas deliveries to Poland, Finland and Bulgaria.
As Putin implements his gas-for-rubles scheme, consumers and industry will have to prepare for much harsher realities. Gas markets are already overheated, and available LNG volumes on the spot market are shrinking. EU importers do not really have an alternative if Moscow decides to halt supply.
By Cyril Widdershoven for Oilprice.com
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