Russia’s Gazprom Cuts Off Natural Gas to Netherlands

Russia’s Gazprom Cuts Off Natural Gas to Netherlands
The logo of Gazprom Germania is pictured at their headquarters, in Berlin on April 1, 2022. Fabrizio Bensch/Reuters
Nicholas Dolinger
Updated:

Russian state-owned fuel company Gazprom has cut off natural gas deliveries to the Netherlands, as Russian President Vladimir Putin enforced his ultimatum that payments for Russian natural gas must be made in rubles. The Netherlands is currently the largest country to be cut off because of the ultimatum.

On May 31, Gazprom ceased shipments of natural gas to its Dutch equivalent GasTerra, after the latter refused to make payments for Russian natural gas in rubles, Russia’s fiat currency, as stipulated by the ultimatum.

“Dutch gas trader GasTerra has decided not to comply with Gazprom’s one-sided payment requirements,” GasTerra said in a statement posted on its website. “These payment requirements are set out in a decree passed by Russian President Vladimir Putin regarding payment for the supply of Russian gas. In response to GasTerra’s decision, Gazprom declared to discontinue supply with effect from 31 May 2022.”

GasTerra is half-owned by the Dutch state, with 25 shares owned by Shell and Exxon, respectively. The company refused to comply with Russia’s demands for payment in rubles, which would have required GasTerra to open two accounts with Gazprombank in Moscow: one dealing in rubles and one dealing in euros. GasTerra stated that it refused Putin’s demands out of concern that it might breach international sanctions and incur financial and operational risks.

The suspension of gas deliveries to the Netherlands will result in a deficit of approximately 2 billion cubic meters (m3) of contracted gas between now and the planned end of the Russo–Dutch energy contract in October. The Dutch energy company stated that it intended to fill the deficit with gas from other suppliers.
“The European gas market is highly integrated and extensive,” GasTerra stated. “However, it is impossible to predict how the lost supply of 2 billion m3 of Russian gas will affect the supply/demand situation and whether the European market can absorb this loss of supply without serious consequences.”

With the new announcement, the Netherlands joins a small, but growing contingent of European countries with Russian natural gas supplies that have been suspended. Bulgaria, Finland, and Poland have all had natural gas supplies from Russia suspended for refusing to pay in rubles, with Denmark likely to follow.

Notably absent from this club are the largest economies of Western Europe. The Netherlands is currently the only economy larger than $1 trillion annual gross domestic product (GDP) to be cut off from Russian gas supplies. At present, Russia hasn’t cut off gas exports to France, Italy, or Spain.

Germany, Europe’s largest economy at $4.3 trillion annual GDP, is notably dependent on Russian gas after the dismantling of its nuclear energy program in the past decade. Since Russia’s invasion of Ukraine last February, German policymakers have scrambled to reduce the country’s dependence on Russian fuels.

The UK remains largely unreliant on Russian fuel exports, with less than 4 percent of its natural gas coming from Russia.