Gas prices soar after Russia’s Gazprom threatens Ukraine transit

LONDON (ICIS)–The benchmark Dutch TTF front month price soared on Tuesday afternoon following a Gazprom statement threatening sanctions against the Ukrainian company organising the Russian gas transit to Europe.

In a Telegram message posted less than 30 minutes before the TTF market close, the company said Russian authorities had “every reason” to impose sanctions against Naftogaz and individuals who had been initiating proceedings against itself for non-payment of transit fees.

Gazprom did not specifically threaten the suspension of gas transit via Ukraine but said: “In practice this will mean a ban on Gazprom from fulfilling obligations to sanctioned persons under competed transactions, including financial transactions.”

The statement came as markets were monitoring news that the idled Russian pipelines Nord Stream 1 and 2 had suffered steep drops in pressure that led to gas leaks in the Baltic Sea.

Writing in the Telegram statement, Gazprom said it “categorically rejected” Naftogaz’ claims about non-payment of gas transit and stressed it had notified the Secretariat of the International Arbitration Court (IAC) of the International Chamber of Commerce and the current head of NJSC Naftogaz of Ukraine.

“Naftogaz Ukrainy, without proper grounds, refused to fulfil its transit obligations through the GIS Sohranivka, and the very fact of non-provision of services was recognized by the Ukrainian company.”

UKRAINE SAFETY MEASURES

Earlier this year the Ukrainian gas transmission system operator GTSOU and Naftogaz as the organiser of transit called force majeure on gas flows entering the Sokhranivka entry point in the occupied territories of eastern Ukraine amid concerns Russian occupants were stealing transit gas.

GTSOU offered to reroute the gas to the Sudzha border point, which is under Ukrainian control, and to offer more capacity than that booked by Gazprom to offset the volumes that could not enter the country via Sokhranivka.

Gazprom not only refused to do so but also reduced its gas deliveries via Sudzha that it was under a contractual obligation to deliver.

This has mean that since June, Gazprom has been delivering only 40% of the total contracted capacity, which equates to 109mcm/day.

Earlier this month, the former CEO of GTSOU Sergiy Makogon told ICIS in an interview that the operator together with Naftogaz would initiate proceedings against Gazprom for paying only 30% of the money it was expecting to pay under the terms of its ship-or-pay contract.

The Ukrainian gas transmission route is only one of two remaining Russian transit corridors after Gazprom sanctioned the Yamal pipeline to Germany via Poland and suspended the transmission of gas via Nord Stream 1 for an indeterminate period earlier this month.