The final flow of gas to the EU could be cut off due to disputes between Russia and Ukraine over the transit process.
Bloomberg reported that European gas prices skyrocketed to 22%, the highest in three weeks, after Russian oil giant Gazprom warned of sanctions against Ukraine's partner Naftogaz. That means the small amount of gas still flowing from Russia through Ukraine to northwestern Europe is in danger.
Ukrainian oil and gas giant Naftogaz said earlier this month it was suing Gazprom in a Swiss arbitration court, saying the Russian giant paid too low a fee for transporting gas to Europe. Naftogaz asked Gazprom to pay according to the "ship-or-pay" terms of the contract. According to this clause, buyers agree to pay for transport capacity according to the contract regardless of the actual volume of gas transported.
Meanwhile, Gazprom said it could not pay for the volume that Ukraine did not transport after Kiev suspended the operation of one of two stations on the border between the country.
Currently, gas orders through Ukraine on September 28 are still stable, according to the Ukrainian transport operator. But traders are closely monitoring any progress as it is the route that still supplies about half of Russia's remaining gas to the EU, the other half via Türkiye.
Tom Marzec-Manser, head of gas analysis at ICIS in London, said that the incidents in the Nord Stream 1 and Nord Stream 2 gas pipelines appear to be just a prelude to this latest progress. If Russia also cuts gas through Ukraine, now the EU cannot even consider turning around or requesting Nord Stream to resolve the situation.
The gas market has been stirred by the news that two branches of the Nord Stream 1 pipeline and one branch of the Nord Stream 2 pipeline have been damaged. The gas leak in the Baltic Sea and two powerful explosions near the gas pipeline have been confirmed by Swedish and Danish authorities.
Nord Stream 1 has been inactive since the end of August, but the incident has further strained the gas market. Germany suspected an act of sabotage. Operating company Nord Stream AG said the damage to the pipeline was "unprecedented" and could not say when the pipeline could continue to operate technically.
Nord Stream 1 supplied nearly 40% of Russia's gas to Europe last year. But Gazprom has cut capacity in the pipeline since June due to technical problems with the turbine, before completely stopping supply.
Nord Stream 2 - running near Nord Stream 1 - has been under construction since the end of 2021 but has never supplied any gas to Europe because it has not been licensed by Germany.
