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Ukraine, Russia gas clash raises threat to Europe’s supply

Russian gas flowing via one of two key points will stop from Wednesday as occupying forces disrupt operations, the Gas Transmission System Operator of Ukraine said in a statement.

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United Kingdom/Ukraine: Ukraine and Russia clashed over natural gas sent via pipelines to Europe in a spat that could disrupt supplies transiting the war-hit country for the first time since the invasion.

Russian gas flowing via one of two key entry points will stop from Wednesday as occupying forces disrupt operations, the Gas Transmission System Operator of Ukraine said in a statement on its website. While the network manager said the fuel could still be rerouted to avoid disruptions, Russian gas giant Gazprom PJSC said the switch isn’t possible because of how its system works.

Russia has been sending gas via Ukraine normally despite the conflict, but initial orders show overall transit shipments are set to decline 18% on Wednesday from a day earlier. The reduction is likely to send European gas prices traded in the Netherlands even higher after gains of 5.4% on Tuesday.

Kyiv had already warned Russia that the actions of its troops and occupiers in the Luhansk region of eastern Ukraine could end up halting about a third of the gas it transits to Europe. Ukraine’s gas network manager said it can’t meet contractual obligations via the Sokhranivka border point, but said flows could be rerouted via Sudzha.

“Ukraine doesn’t bear responsibility for gas transit via Russia-occupied territories and Gazprom was properly informed about that,” Ukrainian state-run energy company Naftogaz said in a statement on its website. The firm said it offered to reroute the gas, a switch that it said presents no technical difficulties and doesn’t involve additional costs for Russia.

A Gazprom spokesman said the company was notified by Ukraine of the pending disruption, but didn’t receive any confirmation of force majeure. While the company said switching to Sudzha would be technically impossible, gas orders show an increase of 12% through the entry point.

European gas traders remain on edge even though prices have eased recently thanks to a steady stream of liquefied natural gas cargoes arriving in the region and warm weather. Russia supplied about 40% of the European Union’s gas demand last year, and about a third of that was sent via Ukraine, making it a linchpin in the continent’s energy security.

Ukraine’s gas grid said it can no longer accept Russian gas transit via Sokhranivka from 7 a.m. local time. Transit orders via that point for Wednesday have already fallen to zero, but flows via the Sudzha route  are set to rise 12% from a day earlier. That suggests some rerouting may take place away from the Russia-occupied territories in Ukraine’s east.

Ukraine can guarantee the safe transportation of gas only via territory it controls, which is why it offered to reroute, Naftogaz said.

Sokhranivka and Sudzha are two key points on the border between Russia and Ukraine that receive flows from Gazprom for transit to Europe. As of Tuesday, 27% of the flows went through Sokhranivka, with the rest passing through Sudzha.

Gazprom said it sees no issue continuing to send gas via Ukraine as usual, and that it’s meeting all obligations to European clients. —Bloomberg

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