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RUSSIA BLAMES SANCTIONS FOR GAS PIPELINE SHUTDOWN

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7 days ago
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 * Russia-Ukraine war

Image source, Getty Images

Russia has warned that it will not resume gas supplies along a key pipeline to
Europe until sanctions are lifted.

Moscow has blamed Western countries for its decision not to reopen the Nord
Stream 1 pipeline after it was shut for three days for maintenance.

When asked if supplies would resume pumping if sanctions were eased, a Kremlin
spokesman said: "Definitely".

Gas prices soared on Monday due to mounting concerns over energy supplies.

The Dutch month-ahead wholesale gas price, a benchmark for Europe, was up as
much as 30% in early trading on Monday. Prices in the UK rose as much as 35%
before winding back to £4.50 per therm.

Wholesale prices have been very volatile in recent weeks. They fell sharply last
week when Germany announced that its gas storage facilities were filling up
faster than expected.



Europe has accused Russia of using gas supplies to blackmail European countries
because of the Ukraine conflict.

Kremlin spokesman Dmitry Peskov said on Monday: "Pumping problems arose because
of sanctions imposed against our country and against a number of companies by
Western states, including Germany and the UK.

"There are no other reasons that would lead to problems with pumping."

Last week, state energy firm Gazprom said that an oil leak in a turbine on the
Nord Stream 1 pipeline was behind the closure.

But this has been disputed by the European Union and Siemens itself, the German
firm which maintains the turbine.

"Such leaks do not normally affect the operation of a turbine and can be sealed
on site. It is a routine procedure within the scope of maintenance work,"
Siemens said in a previous statement.


 * No going back to reliance on Russian gas from here
 * G7 agrees to impose price cap on Russian oil
 * How Russia is cutting off gas to Europe



While the UK is not reliant on Nord Stream 1 for its gas, the Kremlin's decision
to squeeze supplies to Europe has driven up the overall cost of wholesale gas.

The overall increase has been behind the spike in the energy bill price cap for
consumers in England, Wales and Scotland.



Mr Peskov criticised European leaders for the surge in bills: "It is obvious
that Europe is getting worse for people, entrepreneurs, companies, to live and
work: less money is being earned, the standard of living is falling," he said.

Liz Truss, who will become the UK's prime minister on Tuesday, has promised to
announce a plan to deal with high energy bills soon after she enters office.

However, UK businesses are not protected by a price cap and, last week, the
British Chambers of Commerce warned firms would "close their doors this winter"
if they were not given support with soaring bills.

Energy expert Bill Farren-Price told the BBC's Today programme that the "crunch
moment" would come later in the year if demand is particularly high for gas and
is going to exceed what can be imported.



He added that looking at action on energy bills would be the top priority for
the incoming prime minister.

A number of European governments have revealed plans to help businesses and
consumers cope with surging energy costs. On Sunday, Germany announced a €65bn
(£56.2bn) package which includes one-off payments to the most vulnerable and tax
breaks to energy-intensive firms.

Over the weekend, Sweden and Finland also announced multi-billion pound packages
to support energy companies.

Other European ministers have accused Russia of using energy supplies as an
economic weapon against those supporting Ukraine. Moscow has denied it is
deliberately restricting exports in the run-up to winter.




European governments are convinced Russia has weaponised the gas markets, by
restricting supplies in order to push up prices.

This makes life harder for businesses and consumers, and tests their own
commitment to supporting Ukraine in the face of Russian aggression.

But we know that Russia makes huge sums from exporting oil and gas, so how can
it afford to do this, especially when it has a war to pay for?

Well for a start, with prices sky-high, it can make the same amount of money
from selling much less gas than would ordinarily be the case.

Secondly, gas sales are much less important to Russia financially than oil
exports. But Europe really needs Russian gas, because it has limited
alternatives.

So the gamble Moscow may be making is that while turning off the taps could
ultimately hit its own revenues, its opponents will suffer a great deal more.




'WAR WINTER'

The pipeline had been due to reopen on Saturday but Gazprom made the
announcement on shutting the pipeline on Friday shortly after the G7 nations
agreed to cap the price of Russian oil in support of Ukraine.

The introduction of a price cap means countries that sign up to the policy will
be permitted to purchase only Russian oil and petroleum products transported via
sea that are sold at or below the price cap.

But Russia says it will not export to countries that participate in the cap.

Swedish Prime Minister Magdalena Andersson said that Russia's actions could not
only risk leading to a "war winter", but could potentially have a knock-on
effect on businesses and its wider economy.



The Nord Stream 1 pipeline stretches from the Russian coast near St Petersburg
to north-eastern Germany and can carry up to 170 million cubic metres of gas a
day.

It is owned and operated by Nord Stream AG, whose majority shareholder is
Gazprom.

This is not the first time since Russia's invasion of Ukraine that the pipeline
has been closed.

In July, Gazprom cut off supplies completely for 10 days, citing "a maintenance
break". It restarted again 10 days later, but at a much reduced level.

On Monday, the Opec+ group of oil producing nations has announced a small cut to
its output at its monthly meeting.

Its members, which includes Russia, said production would be reduced by 100,000
barrels per day in October, reversing an increase the group now says was for
September only.

Analysts said the trim - announced following recent falls in crude oil prices -
was largely symbolic.


MORE ON THIS STORY

 * No going back to reliance on Russian gas from here
   
   3 September

 * G7 agrees to impose price cap on Russian oil
   
   2 September
   
   

View comments


RELATED TOPICS

 * Russia-Ukraine war
 * Gazprom
 * Russia
 * Oil & Gas industry
 * Natural gas





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