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The European Union is considering a full embargo on Russian hydrocarbons, a measure that could be rushed after Russia’s decision to cut off gas supplies to Poland and Bulgaria.
Russian gas company Gazprom has cut off gas supplies to Poland and Bulgaria on the grounds that the two states refused to accept Moscow’s terms to pay for the contracts in rubles.
Russian gas is an essential tool in the Kremlin’s foreign policy
In March, the Russian government ordered all its gas companies to close their ruble gas sales contracts with countries deemed “unfriendly.”
While gas company Gazprom argues that it cut off supplies because “there were no payments in rubles,” Poland and Bulgaria claim that the measure constitutes a violation of the agreed contracts.
Some European officials claim that the sanctions imposed on Poland and Bulgaria are not really due to payment problems, but are really a warning to other Western countries about what could happen if they continue to send arms to Ukraine.
With the Kremlin’s decision, Poland will run out of more than 5 billion cubic feet of gas for the summer. But the situation is even more chaotic for Bulgaria, whose gas consumption is up to 75% dependent on Russia.
The price of natural gas in Europe rose by 11% following the Russian announcement and after falling by 20% during April. Commodity traders are rushing for a possible gas shortage on the European continent. Although below their peak in March, natural gas prices are well above their value a year ago.
European Union announces future sanctions for Russia
European Commission (EU) President Ursula von der Leyen called Gazprom’s announcement “another Russian attempt to blackmail us” and said the EU is preparing a “coordinated response.”
In the coming week, the European Commission is expected to propose a sixth round of economic sanctions against Russia over its continued invasion of Ukraine.
Several EU members, such as Hungary and Germany, have resisted a full embargo on imports from Russia and Europe has been reducing its dependence on Russian oil.
Up to 40% of the natural gas consumed in Europe comes from Russia. By making it compulsory to seal contracts in rubles, Russia is seeking to maintain its currency.
The European Union and especially Germany have been reproached for continuing to buy Russian oil and gas by the President of Ukraine, Volodymyr Zelensky, who believes that the embargo imposed by the West is not enough to stop Russia.
Russia shoots itself in the foot by blocking gas to Poland and Bulgaria
For Moscow, the decision to cut off gas to Poland and Bulgaria is a risky decision, as it could be cutting its revenues for its economy hit by sanctions imposed by the West.
Although the Russian government has been able to partially recover the value of the ruble, Russia faces a black economic outlook. The Russian Duma’s finance committee acknowledged that the Slavic country expects inflation of up to 20% by 2022.
According to the International Monetary Fund (IMF), the Russian economy is estimated to fall by 8.5 % in 2022 due to the imposed sanctions.
Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica