LONDON, Sept 28 (Reuters) - If Moscow carries out a
threat to sanction Ukrainian energy firm Naftogaz, one of the
last functioning Russian gas supply routes to Europe could be
shut, exacerbating the energy crisis just as the crucial winter
heating season begins.
Naftogaz initiated a new arbitration proceeding against
Gazprom earlier this month, saying the Russian company
has not paid transit fees for sending its gas to Europe via
pipelines that cross Ukraine.
Gazprom this week rejected all the claims, adding that
Russia may introduce sanctions against Naftogaz in the case that
it further pursues the matter. Such sanctions would prohibit
Gazprom from paying Ukraine transit fees, which analysts say
could end Russian gas flows to Europe via the country.
Yuriy Vitrenko, chief executive of Naftogaz, said the
company will continue with arbitration proceedings against
"(Sanctions) would make into reality the worst-case scenario
that European governments have been preparing for all summer, a
European gas market without Russian gas," said Natasha Fielding,
head of EMEA gas pricing at Argus Media.
"Transit through Ukraine is the only Russian gas delivery
route to Europe still in use besides the Turkish Stream
pipeline, which serves southeast European countries," she added.
Dutch wholesale gas prices, the European benchmark, shot up
after Gazprom's talk of sanctions on Tuesday, and rallied as
much as 13% on Wednesday to stand around 120%
higher since the start of the year.
Gas flows via the only operational Ukraine transit route
through Sudzha are currently around 42 million cubic metres a
day. Kyiv had already in May suspended the Sokhranivka route
which delivered almost a third of the fuel piped from Russia to
Europe through Ukraine, declaring force majeure.
According to data from think-tank Bruegel, the European
Union (EU) imported around 155 billion cubic metres (bcm) of gas
from Russia last year or about 12.9 bcm a month.
Russian gas imports from the start of 2022 to the end of
last week stood at 60 bcm, compared with 81 bcm in the first
half of last year alone, according to Bruegel's data.
Leaks detected on the Nord Stream 1 pipeline this week make
a resumption of flows on that route unlikely after they were cut
to a fraction of capacity and finally suspended last month with
Moscow citing the need for maintenance.
Meanwhile the Yamal-Europe pipeline has been flowing
eastbound from Germany to Poland for much of this year, although
it has been in stop-start mode for weeks.
Should the Sudzha flows come to a halt, the only Russian gas
being piped to Europe would be via Turkey and the Black Sea
through TurkStream, which has an annual capacity of around 31.5
Gazprom ramped up supply to Hungary via the pipeline in
August but overall Europe has been preparing for months for a
complete stoppage of Russian gas deliveries this winter.
Governments have been scrambling to diversify supply, buying
more liquefied natural gas from suppliers such as the United
States, Qatar and Egypt, as well as introducing measures to curb
demand domestically and save energy.
As a result, European gas storage was 88% full as of Sept.
26, although there are variations between countries.
"There needs to be a combination of 'ifs' to threaten
Europe's energy supplies this winter, including a harsh winter,
prolonged French nuclear outages, and other infrastructure
issues," said Norbert Rücker, head of economics and next
generation research at investment bank Julius Baer.
However, a greater risk remains for next winter as countries
will end this year's winter gas season with very low stocks and
have less Russian pipeline gas available than ever before to
replenish stocks during the spring and summer.
(Reporting by Nina Chestney; Additional reporting by Christoph
Steitz; Editing by Pratima Desai, Kirsten Donovan and Marguerita