The EU-Russia energy war: What are the threats of the Russian gas counter-sanctions for Europe?

Russia imposed sanctions on several European companies through which Gazprom supplied gas to the European Union, and thus raised the stakes in the energy war with Europe, which escalated after the invasion of Ukraine. The first blow of the counter-sanctions came from Germany, the largest industrial power and the main consumer of Russian energy resources in the EU.

The counter-sanctions affected trading companies, but they did not affect gas transportation companies. They can easily be bypassed if the Germans buy Russian gas directly or through other traders. However, this involves renegotiation of contracts.

Putin thus kills two birds with one stone. First, through his efforts, prices in Europe are breaking records, so the new deals will be more profitable than the previous ones. And secondly, in the new contracts it is possible to prescribe payment through Gazprombank, which is preferable for Russia in conditions of freezing of the central bank's foreign currency reserves.

Gazprom Germania, which fell under Russian counter-sanctions, owned Gazprom's European assets, which included critical infrastructure in Germany and the EU (underground gas storage facilities, trading and gas pipelines). German authorities placed it under external management as soon as Gazprom tried to reassign all these assets to a company owned by a Moscow-based DJ.

EuRoPol GAZ - also under Russian sanctions - is the owner of the Polish section of the Yamal-Europe pipeline from Russia through Belarus and Poland to Germany. However: the pipeline with a capacity of 33 billion cubic meters per year (about a third of all Russian supplies to the EU) has been operating for many weeks in reverse mode, pumping gas from Germany to Poland, which was cut off by Gazprom back in April.

"Previously, the Polish side has repeatedly violated Gazprom's rights as a shareholder of EuRoPol GAZ, and on April 26, 2022 put Gazprom on a sanctions list, blocking the company from exercising rights on shares and other securities in EuRoPol GAZ and receiving dividends," Gazprom officials said Thursday, commenting on the government decision to impose sanctions against its joint venture with Poland's PGNiG.

Gazprom's largest German underground storage facility of 4 billion cubic meters and trader Wingas are also subject to sanctions.

All this will deprive Germany of about 3 percent of its daily imports, Economy Minister Robert Habek said. These losses can easily be made up from other sources, albeit more expensive. In addition, Germany continues to receive Russian gas via the Nord Stream pipeline under the Baltic Sea.

An escalation of the crisis is inevitable: Europe is preparing new sanctions against Russian oil, the Kremlin's main export commodity and main source of income. It is easier for the EU to refuse it than a gas.

For Russia, it is vice versa, so a gas attack on Europe is Russia's most effective weapon in its economic war with the EU. And the counter-sanctions are proof that Putin is determined to use them.

Source: BBC