Russia Reduces Gas Exports to Europe, Citing Ukraine As The Reason

Russian gas monopoly Gazprom (MCX:GAZP) stated on Tuesday that it will restrict transit shipments through Ukraine beginning the following week, resulting in a rise in European gas prices.

Gazprom indicated that the decision was made in reaction to Ukraine's refusal to transport gas supplies to Moldova, the poorest country in Europe by most measures.

Since Gazprom ceased shipments through the Nord Stream 1 pipeline and its trunk network to Slovakia this year, only the pipeline that through Moldova and Romania on route to Bulgaria transports large quantities of natural gas to European Union countries. It is consistent with prevailing anticipation in Brussels and other European capitals that Russia, the EU's major supplier previous to its invasion of Ukraine in February, will not supply the union with natural gas this winter. Prior to its invasion of Ukraine, Russia was the EU's top supplier.

Gazprom and Ukraine have a long history of conflicts over transit shipments, extending back to the 1990s, when Moscow first sanctioned illegal siphoning by Ukrainian firms as a cost of retaining influence in its neighbor. Russia's position has hardened since 2005, when the country voted for the first time to move firmly toward the EU.

According to Gazprom, about 52 million cubic meters of Moldova-bound gas are currently trapped in Ukraine, exceeding Moldova's daily need.

At a meeting in Paris on Monday, Moldovan President Maia Sandu warned delegates that her country, which is in the earliest stages of the process to join the EU, was facing "an extraordinary energy crisis" that may "threaten our social peace and security."

Gazprom's announcement had limited influence on northwest European benchmark prices and will have little effect on Europe's overall gas balance in the foreseeable future. The front-month Dutch TTF contract climbed 1.2% to €117.5 per megawatt-hour as of 07:55 ET (12:55 GMT) (12:55 GMT).