Finland lost major gas supplies after refusing to pay the ruble

Russia has cut off its natural gas supplies to Finland after relations between the two neighbors soured over its decision to join the Nordic defense alliance NATO.

Finland is the third European country to lose gas after refusing to pay a ruble oil price from Russia. A major pipeline from the region’s top supplier was cut off early Saturday, according to a filing by Finnish importer Gasum Weir. Poland and Bulgaria shut down their taps last month for the same reason.

Tom Marjek-Manser, head of gas analytics at ICIS, said: “Most in the market expect Finland to be the only buyer to cut deliveries at this time, but there is a risk that buyers elsewhere could suffer the same consequences.” London, citing a recent survey of the company’s merchants.

The lost supply is likely to have a limited impact on the economy of the Nordic countries, which account for only 5% of the energy mix. It is mainly used by factories instead of heating like other European countries. The government has pushed for a speedy exit from Russian fossil fuels.

“Gazprom Exports has informed Gasom that the supply of natural gas to Finland will be cut off from Saturday under the Gasum supply agreement,” the Finnish company said.

Gazprom Exports, the export arm of gas giant Gazprom, said it closed business on May 20 and did not receive payment for the April supply – according to a statement. On March 31, President Vladimir Putin issued a statement stating that “gas flows will be stopped from May 21 until payment is made in accordance with the order.”

Meanwhile, supplies continue to flow into Finland via the Baltic Connector Pipeline from Estonia, but its capacity may not be enough to meet demand. Since then several companies have already switched to other fuels or safer alternatives. For the coming winter, the government on Friday agreed to rent a floating liquefied natural gas terminal together with Estonia.

“The new LNG ship is an important step in improving the security of power supplies in Finland,” Finance Minister Anika Sariko told reporters on Friday. “It simply came to our notice then. The importance of the project cannot be overemphasized now. ”

Although this is a relationship from five decades ago, Finland is a relatively small client for Gazprom. In the first half of last year, about 1% of the company’s combined sales in Europe and Turkey were exports to Russia’s western neighbors.

The North Atlantic Treaty Organization (NATO) with Sweden was suspended a week after Russia ended its sale of electricity to Finland in line with its decision to join the organization. Russia has said that an application to join would result in an endorsement, without providing details.

European benchmark gas futures fell on Friday, and fell more than 9% this week. Prices have fallen since the Russian invasion of Ukraine, but are at a very high level.

Moscow claims

European countries have been divided over how to handle Moscow’s demand since late March that all payments for fuel should be made in rubles, and utilities have responded differently to the challenge. Russia said on Thursday that Gazprom had accepted the request of about half of PJSC’s foreign clients and opened a ruble account, without naming any company.

Russia’s pipeline recently accounted for about 66% to 75% of Finland’s supplies. Russian gas exports to Finland have been declining since 2018, when shipments were about 2.6 billion cubic meters. At 202O they dropped 39%.

Russia’s supply cut grid operators are set to launch the market steering system, which means it could flow rations to users. Finland also has stored fuel, which can be fed into the network if the pressure is too low. Fuel prices could rise further as supply declines.

The situation is “under control,” according to an emailed statement from the Finnish Ministry of Economy.

The biggest users are Neste Oyj – which uses fuel to make the hydrogen needed for its oil refining activities – forestry companies and steel mills.

Gasum said it would still be able to supply natural gas to its customers from other sources through the Baltic connecting pipeline, while its gas filling stations would continue to operate normally.

© 2022 Bloomberg

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