Russia Imposes Sanctions on Gazprom Units in Europe and U.S., Co-Owner of Pipeline – Reuters

LONDON (Reuters) – Moscow has enacted sanctions against the owner of the Polish segment of the Yamal pipeline, which transports Russian gas to Europe, along with the former German subsidiary of Gazprom, the Russian gas producer, whose affiliates cater to Europe’s gas demands.

The affected firms listed by the Russian government are predominantly situated in countries that have imposed sanctions on Russia in light of its invasion of Ukraine, most of which are EU member states.

The immediate impact on gas supplies to Europe, which relies on Russia for more than a third of its gas, remains uncertain. Nevertheless, data from the Gascade pipeline operator indicates that gas flows from Germany to Poland via the Yamal-Europe pipeline have not been interrupted.

Energy prices saw an increase on Wednesday as the European Union considers a potential embargo on Russian crude, while trading companies prepare to restrict their dealings with Russia ahead of stricter EU regulations on Russian oil sales set to take effect on May 15.

In a decree issued on May 3, Russian President Vladimir Putin stipulated that no Russian entity can engage in transactions with those on the sanctions list or fulfill existing agreement obligations. The decree specifically prohibits the export of products and raw materials to the individuals and entities listed.

According to Russian news agency Interfax, the sanctions affect Polish pipeline owner EuRoPol Gaz, Gazprom Germania, and 29 subsidiaries of Gazprom Germania spread across various countries, including Switzerland, Hungary, Britain, France, Bulgaria, the Benelux region, the United States, Romania, and Singapore.

Gazprom relies significantly on the Yamal-Europe pipeline for its gas supplies to Europe, and its operations across and outside Europe are crucial for maintaining the European gas market and its supply to both industry and households. The activities of Gazprom Germania, which are based on Russian gas production, encompass the complete gas value chain, from pipeline transmission to storage, as well as supplying wholesalers and retailers.

Last month, Gazprom divested its ownership of Gazprom Germania without providing an explanation, leading to Germany’s energy regulator taking over its operations. This includes Germany’s largest gas storage facility located in Rehden, Lower Saxony, which has a capacity of 4 billion cubic meters.

The German economy ministry is assessing the Russian announcement regarding Gazprom Germania but has stated that there are currently guarantees on gas supply, which are being continuously monitored. A spokesperson mentioned that the German government and the Federal Network Agency, as trustees of Gazprom Germania, are in the process of implementing necessary precautions and preparing for various scenarios.

Putin portrayed his decree as a reaction to what he characterized as unlawful actions by the United States and its allies, aimed at depriving “the Russian Federation, citizens of the Russian Federation, and Russian legal entities of property rights” or limiting their property rights. The United States and allied nations have imposed unprecedented sanctions on Russia and its business elite, a move that Putin describes as an economic war.

“The intent is clear – just reciprocating the actions by Western Europe, and they get to control the revenue and gas flows,” remarked Ramanan Krishnamoorti, chief energy officer at the University of Houston.

Despite his warnings of reciprocal measures, until recently, the Kremlin’s most severe economic response had involved cutting off gas supplies to Poland and Bulgaria and demanding new payment arrangements from European gas buyers.

The operator of the Polish section of the Yamal-Europe pipeline, Gaz-System, was not immediately available for comment.

EuRoPol Gaz is co-owned by Gazprom and Poland’s largest gas company, PGNiG, and receives transit fees for the Russian gas that crosses through Poland. PGNiG had no immediate response to the sanctions.

Wingas, a subsidiary of Gazprom Germania and one of Germany’s leading gas traders, stated that following the regulatory takeover, it would continue its operations under the new conditions.