News ID: 321315
Published: 0520 GMT April 27, 2022

Hike in fuel prices expected as Russia halts gas supplies to Poland, Bulgaria: Experts

Hike in fuel prices expected as Russia halts gas supplies to Poland, Bulgaria: Experts

Iranian energy experts said the global market will witness an increase in gas and oil prices as Russia halted gas supplies to Bulgaria and Poland on Wednesday for rejecting its demand to pay in rubles.

The European Union is trying to cut its dependence on Russian oil and gas, which is not easy because market conditions are such that there are no serious alternatives to Russian oil and gas, so some EU members oppose sanctions on Russian oil and gas, Iran’s former OPEC governor Mohammad Ali Khatibi told Iran Daily.

The decision was made by Moscow taking direct aim at European economies in its toughest retaliation so far against sanctions over the conflict in Ukraine.

In an exclusive interview with Iran Daily, Iranian energy expert Saeid Saviz said the fear index will leave a great influence on the gas market, followed by a decreased supply from Russia.

The step was denounced by European leaders as “blackmail”, and comes as European countries have joined the United States in ramping up arms shipments to help Ukraine against Russia.

The leaders said they would not comply with the rubles requirement, arguing that it violated the terms of contracts. Only Hungary has agreed to Putin’s demands, according to Fox Business.

Ukraine reported on Wednesday that Russian troops had made gains in several villages there, while Russia reported a number of blasts on its side of the border.

In the case of gas, Europe is trying to replace Russian gas to some extent by importing liquefied natural gas (LNG), which due to the high volume of Russian exports to Europe, it is unlikely that the excess LNG in the market will compensate for the Russian cut, Khatibi noted.

If Europe insists on implementing imposed sanctions on Russian oil and gas, the possibility of replacing Russian oil and gas for Europe seems very unlikely and will lead to an increase in oil and gas prices, he added.

Moscow says the gas cut-off is to enforce its demand for payment in rubles, needed to shield its economy from sanctions.

If the Ukraine conflict continues, Saviz said, Russian gas customers may enter into negotiations with Iran to purchase gas.

Gazprom, the Russian gas export monopoly, said in a statement it had “completely suspended gas supplies to Bulgargaz and PGNiG due to lack of payments in rubles,” referring to the Polish and Bulgarian gas companies. Poland and Bulgaria confirmed the supply had been cut.

“Because all trade and legal obligations are being observed, it is clear that, at the moment, natural gas is being used more as a political and economic weapon in the current conflict,” Bulgarian Energy Minister Alexander Nikolov said.

Significant parts of Europe are dependent on Russian gas, and the gas halt by Russia will put pressure on European industries, Saviz said.

Referring to the Paris Agreement and the recent Glasgow Summit on slowing global warming, he said that by replacing coal and oil for Russian gas, Europe would move in the opposite direction of the set goals and would face problems in this regard.

Russian President Vladimir Putin demanded last month that buyers from “unfriendly” countries pay for gas in rubles, or be cut off.

“The announcement by Gazprom that it is unilaterally stopping delivery of gas to customers in Europe is yet another attempt by Russia to use gas as an instrument of blackmail,” European Commission President Ursula von der Leyen said.

Poland and Bulgaria are both former Soviet-era satellites of Moscow that have since joined the EU and NATO. Poland has been one of the Kremlin’s most vocal opponents over the conflict. Bulgaria has long had warmer relations with Russia, but Prime Minister Kirill Petkov, an anti-corruption campaigner, who took office last year, strongly denounced the military operations of Russia in Ukraine.

Poland receives its Russian gas through the Yamal-Europe pipeline from Russia’s huge gas fields in the Arctic far north, which continues west to supply Germany and other European countries. Bulgaria is supplied through pipes over Turkey.

Other European countries, including Germany, the biggest buyer of Russian gas, did not report cuts.

Supplies from Gazprom cover about 50% of Poland's consumption and about 90% of Bulgaria's. Poland said it did not need to draw on reserves and its gas storage was 76% full. Bulgaria has said it is in talks to try to import liquefied natural gas through Turkey and Greece.

Germany said this week it is hoping to stop importing Russian oil within days. But weaning Europe off cheap and abundant Russian natural gas, which heats its houses, fuels its factories and drives its electric power plants, would be a far more disruptive prospect.

Blasts were heard early on Wednesday in three Russian provinces bordering Ukraine, authorities said, and an ammunition depot in the Belgorod Province caught fire. The regional governor said the blaze near Staraya Nelidovka village had been put out.

Russia this month accused Ukraine of attacking a fuel depot in Belgorod with helicopters and opening fire on several villages in the province. A fire also broke out this week at a fuel depot in nearby Bryansk.

Ukraine has not confirmed responsibility for such incidents but described them as payback.



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