Russia puts sanctions on Gazprom units in Europe and U.S., part owner of pipeline
The entities on a list of affected firms on a Russian government website http://publication.pravo.gov.ru/SignatoryAuthority/government on Wednesday were largely based in countries that have imposed sanctions on Russia in response to its invasion of Ukraine, most of them members of the European Union. The implications for gas supplies to Europe, which buys more than a third of its gas from Russia, were not immediately clear.
Moscow has imposed sanctions on the owner of the Polish part of the Yamal pipeline that carries Russian gas to Europe, as well as the former German unit of the Russian gas producer Gazprom, whose subsidiaries service Europe's gas consumption. The entities on a list of affected firms on a Russian government website http://publication.pravo.gov.ru/SignatoryAuthority/government on Wednesday were largely based in countries that have imposed sanctions on Russia in response to its invasion of Ukraine, most of them members of the European Union.
The implications for gas supplies to Europe, which buys more than a third of its gas from Russia, were not immediately clear. Eastbound gas flows continued via the Yamal-Europe pipeline from Germany to Poland, data from the Gascade pipeline operator showed. Energy prices rose on Wednesday as the European Union weighs a possible embargo on Russian crude, while trading firms are set to cut activity with Russia when tighter EU rules on Russian oil sales come into effect on May 15.
Russian President Vladimir Putin decreed on May 3 that no Russian entity would be allowed to make deals with those on the sanctions list, or even fulfil its obligations under existing deals. The decree explicitly forbids the export of products and raw materials to people and entities on the list.
Russia's Interfax news agency said these comprised Polish pipeline owner EuRoPol Gaz, Gazprom Germania, and 29 Gazprom Germania subsidiaries in Switzerland, Hungary, Britain, France, Bulgaria, the Benelux region, the United States, Switzerland, Romania and Singapore. Gazprom supplies much of its gas to Europe via the Yamal-Europe pipeline, and its various activities across and outside Europe are essential for the European gas market and its supply to industry and households.
Germania operations, based on Russian gas production, cover the entire gas value chain from pipeline transmission to storage and supplies to wholesalers and retailers. Gazprom gave up ownership of the firm last month without explanation, forcing Germany's energy network regulator to take control of operations there.
Those operations include Germany's biggest gas storage facility at Rehden in Lower Saxony, with 4 billion cubic metres of capacity. The German economy ministry said it was examining the Russian announcement on Gazprom Germania but still had no details. The supply of gas is currently guaranteed and is being constantly checked, the ministry said.
"The German government and Federal Network Agency, as trustees of Gazprom Germania, are already in the process of taking the necessary precautions and preparing for various scenarios," the spokesperson said in a statement. Putin framed his decree as a response to what he cast as the illegal actions of the United States and its allies meant to deprive "the Russian Federation, citizens of the Russian Federation and Russian legal entities of property rights" or to restrict their property rights.
The United States and its allies have imposed the most severe sanctions in modern history on Russia and Moscow's business elite, steps that Putin casts as a declaration of economic war. "The intent is clear - just reciprocating the actions by Western Europe and they get to control the revenue and gas flows," said Ramanan Krishnamoorti, chief energy officer at University of Houston.
Putin, 69, repeatedly warned that Moscow would respond in kind, though until last week the Kremlin's toughest economic response had been to cut off gas supplies to Poland and Bulgaria and demand a new payment scheme for European buyers of gas. Gaz-System, the operator of the Polish section of the Yamal-Europe pipeline, could not immediately be reached for comment.
EuRoPol Gaz, jointly owned by Gazprom and Poland's biggest gas company, PGNiG,, and earns transit fees for Russian gas crossing Poland. PGNiG had no immediate comment. Wingas, a Gazprom Germania subsidiary and one of Germany's biggest gas traders, said after the takeover by the German regulator that it would continue operating under the changed parameters.
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