Russia cuts off Poland and Bulgaria from gas: these are the consequences

To start with the answer to the last question: yes. Dutch companies and households will benefit from this, expects energy analyst Jilles van den Beukel of The Hague Center for Strategic Studies (HCSS).

The price on the gas market today stands at about 108 euros per megawatt hour† That is an increase of more than 15 percent compared to before the news about the Russian move came out on April 26.

And Dutch companies notice this, because what they pay is usually directly derived from the price on the market. And many companies have no choice but to pass on that price increase to the consumer.

1. Why does the gas price go up immediately?

Very simple: uncertainty, explains Van den Beukel. “What else can we expect in this area?” But, for the time being it is all about nervousness, there is no panic yet, he indicates.

Van den Beukel sees carrying out Putin’s threat ‘as a shot across the bow of other European countries’. “Putin has really gone all-in: he is giving everything, the stakes are getting higher.” More and more is at stake.

The gas price reacts a lot less extreme than with previous Russian actions (see the chart below). “In any case, it indicates that it is expected that Putin will not tackle Germany and Italy for a while.”

How Russia chooses which country to punish seems rather arbitrary, adds Van den Beukel. It could be related to the fact that Poland and Bulgaria are small buyers. But it could also be that Putin chose Poland for its role in arms transit to Ukraine.

The Ministry of Economic Affairs and Climate is taking into account that more countries will follow, says a spokesperson. “It is expected that it will spread like an oil slick: now Poland and Bulgaria, soon other countries that have a payment obligation.”

This issue could therefore be raised again in May, but for a different country.

2. The Netherlands, for example?

No, say both the Gasunie and the ministry. “There are no signs of a supply interruption,” the spokesperson said.

Dutch energy companies all have long-term contracts for the supply of gas, according to the ministry, which is in contact with the companies today. They already indicated earlier that they would not pay in rubles. Eneco, whose contracts expire this year, have announced that they will not be renewing them.

3. What if Gazprom throws the contracts in the trash?

Then the Netherlands has to rely on other suppliers. Practically this will work, but at a high price, because of the already very tight market.

If there really is a shortage of gas, the Netherlands will switch to the so-called Gas Protection and Recovery Plan (BHG). This regulates who is the first to switch off the gas in case of shortages. Households and hospitals are ‘supplied with gas for as long as possible’.

4. And can’t we just pay in rubles otherwise?

No, not officially. European sanctions prohibit European companies from doing business through the Russian central bank. And it is needed to buy rubles. In addition, no new contracts may be concluded using rubles as a means of payment.

“That means that companies cannot sign Gazprom’s modified contract,” Minister Rob Jetten (EZK, D66) reported last week. to the House of Representatives†

The detour that some companies use is therefore also unusable. Four companies are said to be evading sanctions through a ruble account at Gazprombank, Bloomberg news agency reported. Which companies is unknown.

5. What are the consequences for Poland and Bulgaria?

The consequences are not too bad, says Van den Beukel. “They are prepared for this. Poland, for example, has its own LNG terminal (for liquefied gas, ed.). And they are also building a pipeline to Norway that must be completed on October 1.”

In addition, the Yamal pipeline (see the map below), which normally transports gas from Russia via Belarus and Poland to Germany, can also be used in reverse. And that way, gas can be sent from Germany to Poland if necessary.

For the time being, however, that is not the case. The country’s gas storage is 76 percent full. “And not many other European countries can achieve that,” says Van den Beukel.

What further softens the pain of the Russian move is that the winter is over, so less gas is being used. In addition, the two countries mainly use coal. “The share of gas in the energy supply is smaller than in other countries, such as the Netherlands.”

European market

The Netherlands relies more heavily on gas for its energy consumption than other European countries. It is fortunate that relatively little of our total gas consumption comes from Russia, according to an analysis of the Central Planning Bureau (CPB).

The European gas market is strongly interconnected. Closing the pipeline to Poland can therefore easily be accommodated with (Russian) gas through other pipelines, see the map above.

6. Why is Russia even doing this?

The country says it has been forced to take this step because of “hostile financial and economic sanctions”. This would have stolen large sums of Russian assets, said Kremlin spokesman Dmitri Peskov.

However, there is more behind this move, three experts said previously on RTL Z† Putin hopes, for example, to boost the ruble’s collapsed exchange rate. After all: companies that have to pay their bill in rubles will have to buy them first. And with that, the price goes up. In addition, Putin hopes to sow unrest and division in Europe.

7. And does this work?

In the short term, perhaps, because it will provide Russia with extra money thanks to the increased gas price. But in the long(er) term, Russia gains little from it. “Their revenue model is going down,” explains Van den Beukel.

The need to phase out Russian gas and oil even faster than planned is only increasing for the European Union. Putin is shooting himself in the foot with this.

This is confirmed by the reaction of the European Union. “A new attempt by Russia to blackmail us with gas,” Ursula von der Leyen calls the step on Twitter†

According to the President of the European Commission, the EU is prepared for it. “This is unjust and unacceptable,” said von der Leyen. The two affected countries receive gas from other European countries, she announced at a press conference.

European energy ministers are meeting today, including to discuss new sanctions against Russia. They will probably be announced this week.