Europe gets a taste of sanctions as Russia begins Gas blockades

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Joseph P Chacko
Joseph P Chacko
Joseph P. Chacko is the publisher of Frontier India. He holds an M.B.A in International Business. Books: Author: Foxtrot to Arihant: The Story of Indian Navy's Submarine Arm; Co Author : Warring Navies - India and Pakistan. *views are Personal

Russia could stop its gas supplies to Finland, whose authorities have expressed their willingness to join NATO. The Finnish daily ‘Iltalehti’, citing sources covered by anonymity, said the politicians of the Scandinavian country had been warned of the possible decision by Moscow. Previously, the Russian Foreign Ministry threatened “military retaliation” against Finland’s entry into NATO. If the blockade were implemented, the tabloid warned, some Finnish industries and food production would have serious problems.

Russian energy giant Gazprom has announced it will no longer use the Yamal-Europe pipeline, which ends in Germany, after the company EuRoPol GAZ [a joint venture between Gazprom and the Polish Oil and Gas Company (PGNiG)] that controls the plant in Poland was blacklisted by Moscow. 

The Russian government yesterday announced sanctions against over 30 energy companies in response to the measures taken by the West to respond to the invasion of Ukraine. Europol Gaz is responsible for the Yamal-Europa gas pipeline that crosses Poland. As explained by Gazprom, the sanctions imply that it will no longer be able to use this pipeline.

Russian countersanctions

On May 12, the Russian government approved the list of legal entities subject to counter-sanctions. The decree of the Cabinet of Ministers was published today on the official portal for legal information. The list includes 31 organizations from Germany, France, and other European countries and companies from the United States and Singapore. The counter-sanctions also affect branches of Gazprom Germany, which Gazprom no longer owns, and EuRoPol GAZ, which owns the Polish section of the Yamal-Europe gas pipeline. The document shows that a number of transactions can no longer be carried out with these companies, such as concluding transactions in their favour. In addition, payment transactions and securities transactions involving or in their favour are prohibited. The right of vessels on companies on the list to enter Russian ports is also taken away.

Gazprom Germania group

Most of the 31 companies on the sanctions list belong to the Gazprom Germania group. It is worth noting that the sanctions list includes companies that are global players in the liquefied natural gas (LNG) market. These are Gazprom Global LNG and Gazprom Marketing & Trading Singapore PTE. Ltd., which, among other things, were engaged in deliveries from the Sakhalin 2 and Yamal LNG plants. Now, these companies are cut off from deliveries of liquefied natural gas from Russia.

On March 31, 2022, the Gazprom Group ceased participation in the German company Gazprom Germania GmbH and all its assets, including Gazprom Marketing & Trading Ltd. The Russian holding said that these companies should stop using Gazprom’s trademarks.

In early April, by order of the German Ministry of Economy, this group of companies was transferred under the control of the Federal Network Agency. It seems to be temporary until September 30. But nothing prevents this decision from being extended.

Accordingly, the German Federal Network Agency received the right to appoint and dismiss members of the board of Gazprom Germania and control the assets of the group of companies. Under such conditions, it would have been strange for Russia to conduct business as usual.

The German authorities will have to take some measures because three dozen specialized companies are now cut off from Russian gas supplies.

Russia of using energy as a weapon

German Energy Minister Robert Habeck accused Russia of using energy “as a weapon” after Moscow yesterday imposed sanctions. “The situation is getting worse because energy is now used as a weapon in different ways,” Habeck said at a news conference.

The other headache – payment in Rubles

The Central Bank of the Russian Federation “is subject to sanctions”, so “use this method”, the one decided by Russia which involves opening a ruble account at Gazprombank to pay for supplies of gas, “as we have stated several times, it would be a violation of sanctions and President Ursula von der Leyen has made it clear”. The spokesman for the Energy Commission, Tim McPhie, said during the press briefing in Brussels, after yesterday the Italian Prime Minister Mario Draghi said that we are facing a “grey area.” 

Energy Commissioner Kadri Simson, says McPhie, “spoke about the revision of the guidelines. We are continuing conversations with the Member States to explain the situation.” There have been letters from Gazprom and “additional decrees”, which “we are carefully examining”, but “the position remains that the decree, as previously announced, intersects our sanction regime. It is very clear and has not changed.” On the expected timing for the revised guidelines, McPhie explained that he was unable to give directions, “The work continues,” he said.


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