The threat of cutting off the gas supply, if not paid in rubles, is causing another casualty. Russian gas giant Gazprom has announced that it will stop supplying gas to the Netherlands on Wednesday, in reaction to the refusal of Dutch energy trader GasTerra to pay in rubles.
Gazprom’s move was widely expected following the announcement by Russian President Vladimir Putin that all European gas deliveries should be paid in rubles. In a reaction, Dutch GasTerra stated that it was already securing supplies from other sites. The cancellation of the current contract is scheduled for the period from May 31 to October 1, 2022, with about 2 billion cubic meters of natural gas, or about 5% of Dutch annual consumption. GasTerra has not given any details on where it has bought other volumes, but it appears that it is Norwegian gas or LNG.
Dutch Energy and Climate Minister Rob Jetten said the effects of the Russian move are almost nil, as there is no threat to crucial physical gas deliveries. This means that Dutch consumers will still be able to use natural gas as usual. Still, it looks as if the Dutch minister is now dismissing growing fears not only of rising market shortages but also of another inflationary push, as wholesale gas prices will rise substantially. As a result, Dutch consumers will see their bills increase. According to Dutch law, in times of energy shortages, such as the current natural gas crisis, volume reductions will occur first in several energy-intensive industries, raising prices in a market that is already struggling with supply chain problems.
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The views of the Dutch government and GasTerra that Gazprom’s decision to reduce supply does not have a significant impact on the Dutch economy may be short-sighted. Russia’s move will make European gas markets even narrower, as Dutch importers are now looking for alternative supplies in an already crowded European gas market. At the same time, Gazprom has now shown that it is ready to target large-scale gas customers in northwestern Europe as well. The movement of GasTerra is important, as the Dutch-Russian gas links are deep and historically strategically very good. A total confrontation with major gas importers seems imminent, and other Western European countries should prepare for a possible supply cut.
The Dutch are becoming a good example of Russia’s energy armament. Gazprom’s move is based on Putin’s strategic considerations, as the Netherlands is a crossroads for European gas storage and infrastructure.
The Dutch position shows that not all importers are as flexible as German or Austrian importers. GasTerra’s refusal to pay in rubles, even through a possible financial construction at Gazprombank in Luxembourg, shows the Dutch government’s commitment not to give in to Putin’s pressure. Moscow is raising its stakes after blocking gas supplies to Poland, Finland and Bulgaria.
As Putin implements his ruble gas scheme, consumers and industry will have to prepare for much harsher realities. Gas markets are already overheating and LNG volumes available in the spot market are shrinking. EU importers really have no choice if Moscow decides to stop supply.
By Cyril Widdershoven for Oilprice.com
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