In Dramatic Escalation, European Nat Gas Prices Soar After Gazprom Warns Ukraine Flows At Risk

In Dramatic Escalation, European Nat Gas Prices Soar After Gazprom Warns Ukraine Flows At Risk

In a day of constant news surrounding European gas flows, including the potential sabotage of the Nord Stream pipeline, moments ago, Russia state-owned gas giant Gazprom PJSC warned that another major source of gas flows to Europe was at risk, just hours after three massive gas pipelines were hit by suspected sabotage.

As Bloomberg reports, in a dramatic escalation of the energy standoff between Russia and Europe in little over 24 hours, the Nord Stream pipeline was knocked out by what German officials said looked like sabotage. Gazprom then said that one of two remaining routes bringing gas to Europe - via Ukraine - was at risk because of a legal spat.

Specifically, as Reuters notes, Gazprom rejected all claims from Ukraine's energy firm Naftogaz in arbitration proceedings over Russian gas transit, and had notified the arbitration court. It also said that Russia may introduce sanctions against Naftogaz in case it further pursues the arbitration case, meaning Gazprom would be prohibited by the sanctions from paying Ukraine the transit fees.

In Dramatic Escalation, European Nat Gas Prices Soar After Gazprom Warns Ukraine Flows At Risk

Naftogaz had initiated a new arbitration proceeding against Gazprom earlier this month, saying the Russian company did not pay for the rendered service of gas transportation through Ukraine. The company had said "funds were not paid by Gazprom, neither on time nor in full" for the gas transit.

Gazprom said on Tuesday that Naftogaz had no "appropriate reasons" to reject its obligations on transit via the Sokhranovka point, a key route for Russian gas exports to Europe.

In May, Ukraine suspended the flow of gas through Sokhranovka, which it said delivers almost a third of the fuel piped from Russia to Europe through Ukraine, blaming Moscow for the move and saying it would move the flows elsewhere.

Following the report that Russia may soon halt natgas transit via Ukraine, gas prices quickly jumped almost 20% as traders factored in the prospect that Europe will have to live without Russian gas this winter - and beyond.


Gazprom said that a legal dispute risks prompting Moscow to sanction Ukraine’s Naftogaz. If that happened, then Gazprom would be unable to pay transit fees, the company said on Telegram, putting at risk flows.

“In practice, this will mean a ban on Gazprom from fulfilling obligations to sanctioned bodies under completed transactions, including financial transactions,” the company said.

If, or rather when, supplies through Ukraine are shut down, it would leave Gazprom sending gas only via the TurkStream pipeline to Turkey and a handful of European countries that haven't severed business ties with Russia.

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