Russia puts the gas squeeze on France and Italy

Russia’s Gazprom has cut gas deliveries to France and Italy, just days after their leaders were in Kyiv to formally back Ukraine’s bid to join the EU.

That’s raising alarm that a slowdown in deliveries could derail EU efforts to build up supplies ahead of next winter and protect the bloc from Russian energy blackmail.

France’s gas network operator GRTgaz said Friday it hasn’t received any Russian gas via Germany since Wednesday; Italy’s state energy company Eni said it would only receive half its requested shipments on Friday, the third day of a shortfall in deliveries.

Germany reported a sharp reduction in supplies through the undersea Nord Stream pipeline on Wednesday, with Gazprom saying flows were at 67 million cubic meters per day instead of 167 million cubic meters.

German Chancellor Olaf Scholz was in Kyiv on Thursday alongside France’s Emmanuel Macron and Italy’s Mario Draghi to show support for Ukraine.

Italy gets around 40 percent of its gas from Russia, while Germany gets a third. France, with access to liquefied natural gas import terminals, gets about a fifth of its supply from Russia.

Gazprom blamed the lower flows on maintenance work on pipeline compressor stations and Canada’s reluctance to send back crucial equipment because of sanctions levied against Russia for invading Ukraine. But Germany’s Vice Chancellor Robert Habeck dismissed that explanation and labeled the reduction a “political decision.”

Italian Prime Minister Mario Draghi said: “We and Germany and others believe that these are lies.”

Russia is warning that the gas squeeze could get even worse.

“I do not rule out that there will be serious problems in the European market this year, especially in terms of passing the fall and winter period,” Deputy Prime Minister Alexander Novak said Friday, according to Interfax.

In recent weeks Russia’s gas export monopoly Gazprom has cut off gas deliveries to Poland, Bulgaria, Finland, the Netherlands and Denmark after companies in those countries refused Kremlin demands to pay in rubles.

Novak said that 90 percent to 95 percent of Russia’s remaining foreign customers have agreed to the ruble payment scheme, but now Russia is turning off the taps even to them.

Lower gas flows could wreak havoc on EU plans to rapidly build up gas storage ahead of the winter heating season. The EU has agreed to a mandatory target of filling storage to 80 percent by November 1 — aimed at allowing the bloc to ride out a complete shut-off of Russian deliveries and part of the wider program of ending the EU’s dependence on Russian energy.

The overall level of European gas storage is 52 percent, GRTgaz said. Germany’s gas storage is about 55 percent full, Italy’s is at 52 percent and French storage is at 56 percent, while other countries like Poland say theirs are 95 percent full.

“The pressure point is this winter. [Russian President Vladimir] Putin knows this. He will have max leverage now. Hence Russia is cutting deliveries,” Tim Ash, an analyst at BlueBay Asset Management, said in an emailed research note on Friday.

The slowdown in deliveries is causing prices to spike; they were above €125 per megawatt hour on the benchmark Dutch TTF hub on Friday, compared to €100 on Wednesday and €60 at the beginning of the year.

EU countries are also scrambling to find other suppliers.

France’s GRTgaz said that flows through pipelines connecting to Spain had greatly increased in response to the Russia cut-off. LNG deliveries are also up 66 percent in the first five months of this year compared to the same period in 2021, it said.

However, the company warned that LNG import terminals were now “close to their technical maximum,” which could put a ceiling on efforts to import more liquid gas shipments until capacity expansions are completed in the coming years.

If Russian deliveries aren’t reactivated and Europe experiences a frosty winter then GRTgaz said it would be forced to issue a national alert encouraging reduced gas consumption.

Germany is already calling on people to use less gas, with Habeck calling it, “the order of the day.”

Russia’s Novak told national TV on Friday that Russia would be willing to supply the up to 45 billion cubic meters of gas that European countries would need to bolster their gas storage reserves to 80 percent — but there are strings attached.

“We’re ready to cover in full gas supplies,” Novak told Rossiya-1. “But of course, it’s necessary to create economic conditions and not close supplies politically.”