Russia’s Gazpromtrans, the rail shipment subsidiary of state gas monopoly Gazprom, said it stopped taking orders to transport liquefied petroleum gas (LPG) to Ukraine as of Feb. 18 because of political tensions between the two countries.
Gazpromtrans told its clients in a note to consider other destinations for their supplies, but that it would fulfill existing orders and continue to provide full compensation to customers if any damage is caused to rail cars during deliveries.
Russian President Vladimir Putin on Feb. 21 said that his government had officially recognized the independence of the Luhansk and Donetsk regions of eastern Ukraine controlled by pro-Russian separatists since 2014, after weeks of tense troop buildups in the area by NATO and Russian forces.
The announcement by Putin spurred a selloff in Russian assets and pushed global oil prices to their highest since 2014.
Putin quickly deployed troops in the two regions after the statement, while denying his actions were an invasion, prompting the United States and European Union to discuss potential sanctions.
In a vote on Feb. 22, the Russian Duma ratified the treaties “on friendship, cooperation, and mutual assistance” between the two breakaway republics and Russia, authorizing Putin’s use of military force outside the country.
Last year, the Russian oil freight company shipped 64,000 tons of LPG to Ukraine, which accounted for 10.7 percent of all Russian supplies of the fuel to the country.
Putin said that Russia will continue to supply natural gas to world markets, after Germany halted the certification of the Nord Stream 2 undersea gas pipeline, which would connect Russia with Germany, in response to Moscow’s troop deployment to the two breakaway regions in eastern Ukraine.
“Russia aims to continue uninterrupted [gas] supplies, including liquefied natural gas, to the world markets, improve related infrastructure, and increase investments in the gas sector,” he said.
On Feb. 24, in response to the Kremlin’s recent actions, President Joe Biden announced at the White House a new set of sanctions and limitations on exports to Russia. He added that the 27 European Union (EU) members and G-7 members will also participate in these sanctions.
“This is the beginning of a Russian invasion of Ukraine … so I am going to begin to impose sanctions in response,” Biden said Feb. 22 in a 10-minute statement.
“Like I said last week, defending freedom will have costs for us as well and here at home. We need to be honest about that,” he added.
“When all is said and done we’re going to judge Russia by its actions, not its words.”
“Whatever Russia does next, we’re ready to respond with unity, clarity and conviction … I’m hoping diplomacy is still available,” the president said.
Biden appeared an hour late to his 1 p.m. White House press conference and left without taking questions.
Ukrainian President Volodymyr Zelensky called on Europe to suspend the gas pipeline “immediately” after the Kremlin’s recognition of the separatists.
The European Union agreed to new four-part sanctions that would blacklist more Russian politicians, lawmakers, and officials, forbid EU investors from trading in Russian state bonds, and target imports and exports with the separatist republics.
Germany, Russia’s top gas consumer, quickly followed with an immediate halt of the certification of the Nord Stream 2 pipeline, after Chancellor Olaf Scholz made the decision in unity with the EU and its allied states.
The Germans, up until recently, were heavily in favor of the pipeline project, despite security objections from the United States and other nations in the region.
However, Europe secures about 46 percent of its natural gas requirements from Russia, and Nord Stream 2 would have supplied much of the needed intake.
The Russian energy minister mocked the EU’s decision saying that Europe would not be able to replace large volumes of Russian gas with LPG immediately from elsewhere without causing shortages.
The Yamal gas pipeline, which sends Russian gas westwards to Germany via Poland, was switched eastwards, sending the gas back to Poland.
European spot gas prices rose by 10 percent to 78.55 euros per megawatt hour (MWh) after this recent escalation in tensions between Russia and Ukraine, but is still well below the all-time high of 186.25 euros per MWh on Dec. 21.
Most liquid gas from Gazprom to Ukraine is done via spot sales delivery contracts, which are currently low due to winter seasonal factors, but if the crisis persists until March or April, some shortage of LPG supplies may be felt in the Ukrainian market according to analysts.
