Russia Reduces Gas Flows to Italy and Germany Amid Showdown With the West Over Ukraine

By Dimitri Simes | June 15, 2022 | 6:06pm EDT
(Photo by Ina Fassbender / AFP via Getty Images)
(Photo by Ina Fassbender / AFP via Getty Images)

Moscow (CNSNews.com) – Russia has reduced natural gas exports to Italy and Germany, the latest move in a rapidly escalating energy showdown between Moscow and the West resulting from the Ukraine crisis.

Russia gas monopoly Gazprom on Wednesday cut its gas flows to Italy by 15 percent without explanation, Italian energy giant Eni reported. A day earlier, Gazprom announced plans to reduce gas supplies to Germany through the Nord Stream pipeline by 40 percent – from 167 million to 100 million cubic meters per day.

In the German case, Gazprom blamed the move on the Siemens Energy company. In its public statement, it said the German company had failed to return a turbine used to power one of the pipeline’s compressor stations that had been sent to Canada for repair.

Siemens Energy told Reuters the turbine in question was stuck in Montreal, since sanctions imposed by Canada made it impossible to return the refurbished item to its customer.

“Against this background, we have informed the governments of Canada and Germany and are working over an acceptable solution.”

Launched in 2012, Nord Stream is an underwater pipeline that delivers up to 55 billion cubic meters of Russian gas to Germany through the Baltic Sea. Moscow and Berlin were in the final stages of commissioning a second Baltic Sea pipeline, Nord Stream 2, but the project was canceled after the Kremlin sent troops into Ukraine in February.

Since the start of the conflict, the U.S. and European Union have imposed a series of new sanctions against Russia’s energy sector.

In March, President Biden signed an executive order prohibiting imports of Russian oil, liquefied natural gas, and coal, and last month, the E.U. announced it would ban 90 percent of Russian crude oil imports by the end of the year. Both have also introduced technological export controls designed to make it harder for Russia to modernize its energy facilities and equipment.

Russia has repeatedly called Western sanctions an act of economic warfare. In March, President Vladimir Putin signed a presidential order that required “unfriendly countries” to begin paying for Russian gas in rubles. Since that decree, Russia has suspended gas exports to Poland, Bulgaria, Finland, Denmark, and the Netherlands over their refusal to comply with the demand.

Despite the sanctions, Russia generated a record $97 billion in revenue from fossil fuel exports during the first 100 days of its so-called “special military operation” in Ukraine, according to a recent study by the Center for Research on Energy and Clean Air in Finland. For context, that figure is nearly four times the amount Russia spent on its military between January and April.

The Helsinki-based center calculated that China was Russia’s largest individual fossil fuels customer ($13 billion) over that period, but noted that E.U. member states still accounted for 61 percent of Russia’s total fossil fuel sales, worth approximately $60 billion.

Some Russian analysts have warned that Moscow may preemptively impose a partial or total energy embargo against Europe in the coming months.

Sergey Vakulenko, former head of strategy and innovation for Gazprom’s oil subsidiary, contended that European governments’ efforts to completely reduce their dependence on Russian gas would likely take years.

Fully aware of this predicament, Russian policymakers could decide to apply political pressure on Europe by threatening to cut gas supplies, Vakulenko predicted.

“The potential application of [Russian] sanctions to key pipelines may be an oversight that can be fixed by an agreement between the government and Gazprom, or an intentional inclusion that would raise the stakes in the new gas war,” he wrote in an article for the Carnegie Endowment for International Peace.

“It could also be a deliberate or fortuitous ambiguity that makes it possible to create a very plausible threat, but to only pull the trigger on it at a convenient moment, should one arise.”

Alexandra Prokapenko, a former advisor to the Russian Central Bank of Russia, made a similar argument, saying preemptively halting all oil shipments to Europe was one way Russia could retaliate against Western arms shipments to Ukraine.

It could potentially enable Russia to push for a dialogue on sanctions from a position of strength, she contended. 

“European politicians will face several urgent tasks all at once: looking for alternative suppliers, explaining the growth in prices to voters, and softening the blow of the embargo for the E.U. countries most dependent on Russian oil,” Prokapenko wrote for the Carnegie Endowment. “Given that this will all be happening as fighting in Ukraine continues, there will be a strong impetus to negotiate with the Kremlin.”

For its part, Ukraine has called upon the West to shut down the Nord Stream pipeline entirely. Sergiy Makogon, the CEO of Gas Transmission System Operator of Ukraine (GTSOU), argued on the EurActiv website that such a move would force Moscow to shift more of its gas flows to Europe through Ukraine.

“The more dependent Russia is on Ukraine for transit, the less likely it is to bomb our infrastructure and cause disruption in the energy markets,” Makogon said.

GTSOU is the Ukrainian company that provides transportation of natural gas to consumers in Ukraine and countries in the E.U.  Ukraine earns important transit revenue from the pipelines crossing its territory en route to markets further west.

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