Gazprom Reduces Gas Flows To Italy

Gazprom Reduces Gas Flows To Italy 1

Yves here. Yesterday’s press had a fair bit of upset over the fact that Gazprom had cut gas shipments to Germany over Nord Stream 1 by about 40%. That plus the news that the second biggest US LNG exporting plant would be out of commission for months, as opposed to weeks, due to a fire, led European gas prices to rise 13%.

Russia at least had what appears to be a good excuse for reducing gas flows to Germany. Siemens was contracted to repair some Gazprom equipment in St. Petersburg. According to RT (hat tip Rev Kev) Five out of eight “pumping units” had not been returned on time and then some malfunctioned when reconnected. Reader Polar Socialist added:

The reason to drop throughput from 167 million cubic meters to 100 was that Siemens sent the pump to Montreal for repairs, and Canada refuses to deliver it back – because sanctions.

Meanwhile Gazprom took another pump offline today due to delayed maintenance, thus dropping the throughput to 67 million cubic meters per day. So now apparently only 40% of the max capacity is in use.


If that’s the real reason, it could conceivably get sorted out, although it seems probable that it would take a the very least a month. Recall also that the EU has been muttering about a gas embargo in its next round of sanctions, to the degree that Hungary is again being forced to play bad guy and object strenuously.

In the meantime, as you’ll see, German Vice Chancellor Robert Habeck has been harrumphing that the Russia cuts are obviously political. Even if true, so what? Russia has been astonishingly restrained in not doing much in the way of counter sanctions, despite Gilbert Doctorow reporting what would seem to be obvious: the general public in Russia is frustrated that Putin hasn’t punched back, as guests on Russian political shows make clear.

However, remember Russia’s retaliatory economic sanctions? The ones that seemed like a as if they had turned out to be a damp squib? From a May 12 post:

Russia published its initial list of parties subject to its “retaliatory special economic measures.” Putin established the program by decree on May 3, designed to address the unlawful taking of property and property rights by unfriendly parties. The order tasked officials to come up with targets in ten days and develop additional criteria.

We speculated that Germany’s seizure of Gazprom operations, which included storage facilities, would be a prime initial target. We were correct…TASS gives an overview:

The list includes 31 companies from Germany, France and other European countries, as well as from the USA and Singapore. In particular, it includes former European subsidiaries of Gazprom, traders and operators of underground gas storage facilities.

In particular, Russian authorities, legal entities and citizens will not be able to conclude transactions with the sanctioned entities and organizations under their control, fulfill obligations to them under completed transactions, and conduct financial transactions in their favor. This includes the concluded foreign trade contracts….

Now so far this is all very entertaining, but what does it mean? It appears Europeans in the gas and possibly also electricity business won’t know for sure until Russia counterparties tell them their contracts are cancelled or they otherwise won’t be doing business with them. Remember that the sanctions are sweeping in terms of subjecting all Russian individuals and legal persons to them. And their application goes beyond the entities listed to include “organizations under their control.”

It looks like Russia knew exactly what it was doing. Consider the impact of the most obvious step Russia would take under these sanctions, of no longer supplying gas to the stolen Gazprom businesses. From reader vao:

But there is more on the gas front in Germany, and costs for the German State are piling up.

Remember that story with Gazprom Germania taken over by the Bundesnetzagentur as trustee? Well,

1) After being placed under the administration of the Bundesnetzagentur, Gazprom embargoed supplies to its former German unit, i.e. Gazprom Germania and its host of subsidiaries storing and delivering gas in Germany. This means that GG has not yet managed to re-fill its storage tanks.

2) Furthermore, since GG had contracts to fulfil, it had to acquire gas elsewhere at much higher prices — which proved totally unprofitable, so much so that GG is nearly bankrupt.

3) The German government is now embarking on a reorganization to avoid the cessation of activities by GG. GG will be lent up to €10bn through the KfW to ensure the continuity of operations.

4) It is not yet certain whether the government will back the loan with a State guarantee, or whether it will convert it to equity (in which case the German State will become a shareholder of GG).

5) The trusteeship will be converted from October onwards to a permanent administration, and Gazprom Germania renamed to “Securing Energy for Europe GmbH”.

6) In another step, the Bundesnetzagentur has decided to grant a 40% rebate on the fees to be paid when feeding the German gas distribution networks from LNG supplies.

So it is not just the German industry and households that are feeling the pain because of high gas prices — the State budget is getting directly hammered as well because of the consequences of the spat with Russia.

Perhaps I am thinking too much like an American who has done time in finance, but Germany should have realized as soon as Russia announced the retaliatory special economic measures against all former Gazprom entities and joint-venture partners in Europe, that they’d be getting nor more gas when they were still on the hook for deliveries. They should have put the German companies in receivership immediately so as to get out of the obligation to perform on the supply agreements. Admittedly this would have shifter the pain somewhere else, but at least German taxpayers would have been spared.

And now to Italy. We had pointed out that some of the Gazprom entities listed in the retaliatory countersanctions were Italian or had customers in Italy, such as Gazprom Schweiz AG, which trades natural gas in Italy, and PremiumGas SpA. So one wonders if the gas cutback to Italy is due at least in part to the retaliatory special economic measures.

By Julianne Geiger, a veteran editor, writer and researcher for, and a member of the Creative Professionals Networking Group. Originally published at OilPrice

  • Eni: Gazprom reduced gas flows to Italy without a reason.
  • Italy gets 40% of its imported gas from Russia.
  • News of Tuesday’s reduced gas flows to Germany said natural gas prices soaring by 13%.

Russia’s Gazprom has reduced the flow of gas to Italy, an Eni spokesman has said, according to Reuters. Gazprom did not give a reason for the reduction.

“Eni confirms that Gazprom has communicated a limited reduction in gas supplies for today, amounting to approximately 15%,” the spokesman for Eni said, adding that the company was constantly monitoring the situation.

On Tuesday, Gazprom announced that it was cutting natural gas flows to Germany via the Nord Stream pipeline by 40% due to needed equipment repairs that had been delayed. Gas supplies via Nord Stream would therefore be limited to 100 million cubic meters per day, compared to the planned volume of 167 million cubic meters per day, Gazprom said.

News of Tuesday’s reduced gas flows to Germany said natural gas prices soaring by 13%. Nord Stream flows rose slightly on Wednesday. But in July, Nord Stream is scheduled to undergo planned maintenance for two weeks. During this time, there will be no gas flow via Nord Stream to Germany, Gundesnetzagentur said earlier this week.

Italy gets 40% of its imported gas from Russia, equivalent to 29 billion cubic meters, according to Reuters.

Italy is already working on sourcing gas from alternative suppliers, including from Algeria, Azerbaijan, the DRC, Angola, and Qatar. Eni is also in talks with Egypt about boosting LNG imports. Eni has already struck a deal with EGAS to increase nat gas imports by 3 billion cubic meters per day. The new agreement would boost capacity to send even more LNG to Italy, but this would likely take up to two years to complete.

Both Germany and Italy told companies last month that they could open ruble accounts, which would allow them to continue gas purchases from Russia without running afoul of sanctions.

While no reason was given for Wednesday’s gas disruption to Italy, Germany’s Economy Minister Robert Habeck said Gazprom’s Tuesday decision to reduce gas flows to Germany was politically motivated and not due to technical issues like Gazprom said.

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