Gazprom threatened to susupend gas delivery to Europe

GAZPROM

For the first time, Russian gas monopolist Gazprom, threatened to suspend gas delivery to Europe if the project Turkish Stream gets terminated. Aims of Russian authorities is to realize this project because after that, they can abolish gas transit through Ukraine.

“If they force us to terminate the project, we will do it”, said the head of Gazprom Alexei Miller at a conference in Berlin. According to him, the EU is trying to shift all the risks to the gas supplier, which creates difficulties for Gazprom. “Europe must give a clear and categorical response- do they need this resource base or not,” said Miller. According to experts, before, the Russian authorities and Gazprom’s management insisted that they would never violate contractual obligations towards European clients.

Response to the EU actions

According to Dmitry Baranov, a leading expert in Finam Management, one of the reasons for this harsh statements is creating a European energy alliance. Earlier, in March 2015, EU leaders endorsed the proposal of the European Commission on the concept of creating such an alliance.

As a result, European Commission will directly affect the business contracts on gas supply, including contracts of Gazprom. Previously, European consumers arranged with suppliers individually, and conditions of business contracts were strictly confidential. As we can see from Alexei Miller’s statement, the European Union in its relations with Russia is trying to get out of mutual dependence, which was present in long-term contracts for more than 40 years. “Even if the European Commission decides to establish unique import price of gas, it will not be as low as ours”, he said.

Creation of a new alliance generates risks for the project of a new pipeline. “The risk which appeared for the Turkish Stream may be the cause for Miller’s statement”, said Baranov. Judging by the opinion of Ilya Balakirev, Chief Analyst of UFS IC, “It is yet another attempt to encourage the EU to resolve potential problems with the transit of gas through Ukraine. “

Alternative delivery

By the year of 2019, Gazprom plans to stop the transit of gas through Ukraine. In order to do this, they need to build the South Stream pipeline with the capacity of 63 billion cubic meters under the Black Sea from Russia to Bulgaria, and then to countries in southern Europe, including countries in the Balkans. However, under the pressure of European Commission, Bulgarian authorities have blocked the project because it does not meet the requirements of the Third Energy Package. According to the document, one party can not at the same time be both, a supplier and owner of the infrastructure. At the end of 2014, Gazprom dropped out of South Stream gas pipeline and announced the construction of similar pipeline- Turkish Stream.

“If the situation will evolve in a negative way regarding monopoly, Gazprom could lose a significant part of the European market, although it is too early to talk about complete replacement by Iran”, said Ilya Balakirev. According to him, Europe will not be able to fully give up on Russian gas but also, Russia can not give up European gas market without painful results, despite all the “threats”. In any case, both sides will have to negotiate. During the cooperation with Europe in the last couple of decades, Russia proved that they are reliable suppliers and that European market is important for them”, said Dmitry Baranov.

Source: Russia Beyond The Headlines

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