Russian energy giant Gazprom halted gas supplies to Poland and Bulgaria over their failure to pay for gas in rubles, the state-owned company announced on Wednesday, as the Kremlin retaliates against Western sanctions imposed over its invasion of Ukraine.

Key Facts

In a statement, Gazprom said it has not received any payments from PGNiG or Bulgargaz, respectively Poland and Bulgaria’s state gas companies, since April 1.

Gas payments from “unfriendly” countries from that date must be made in rubles, according to an order from Russian President Vladimir Putin, Gazprom said, adding that the relevant parties were “duly informed” of the requirement.

Deliveries will not resume until payments are made in line with Putin’s order, Gazprom added.

Gazprom threatened to cut European gas supplies further if Poland or Bulgaria—which host pipelines supplying gas from Russia to a number of other countries—take supplies meant for other countries.

Sofia and Warsaw have said steps have been taken to ensure alternative supplies of gas are available to offset the loss of Russian supplies and previously balked at Putin’s demand to pay in rubles.

Bulgarian energy minister Alexander Nikolov criticized the decision as a breach of contract as Bulgaria has already paid for Russian gas deliveries for April, according to Sky News and Reuters.

Key Background

Putin has demanded countries pay for Russian gas—a major export—in rubles as a means of offsetting the impact of Western economic sanctions and propping up the currency. While the technicalities of Putin’s order mean buyers can continue to make payments in the currency specified in their contracts—most in Europe are in euros or dollars—the European Union warned the mechanism risked breaching EU sanctions against Moscow and a host of European countries refused to comply. Poland and Bulgaria are the first countries to be cut off for refusing to pay in rubles. The bloc, including Bulgaria and Poland, relies heavily on Russia for its energy, accounting for around 46% and 90% of gas in Poland and Bulgaria, respectively, according to the Polish think tank Forum Energii and Politico.

Big Number

20%. Futures contracts tracking wholesale gas prices in Europe jumped around a fifth in early trading on Wednesday following Gazprom’s announcement, according to the Financial Times.

Crucial Quote

“It is clear that at the moment…natural gas is being used more as a political and economic weapon in the current war,” Nikolov said, according to Reuters.

What To Watch For

Europe’s response. European Union President Ursula von der Leyen tweeted that Gazprom’s announcement “is another attempt by Russia to blackmail” the bloc with gas. She said they are “prepared for this scenario” and “mapping out” a coordinated response.

Further Reading

Russia Threatens To Cut Off Gas To Poland After Country Declines To Pay In Rubles (Forbes)

Putin Plans To Make ‘Unfriendly’ Countries Purchase Russian Gas In Rubles (Forbes)

Brussels warns EU countries that ruble gas payments may breach sanctions (Politico)

Source: Forbes

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