LONDON Reuters - If Moscow carries out a threat to sanction Ukrainian energy firm Naftogaz, one of the last functioning Russian gas supply routes to Europe could be shut, further exacerbated the energy crisis as the crucial winter heating season begins.
Naftogaz initiated a new arbitration proceeding against Gazprom earlier this month, saying the Russian company has not paid transit fees for sending gas to Europe via pipelines that cross Ukraine.
Gazprom rejected all of the claims, saying Russia may bring sanctions against Naftogaz in the case that it pursues the matter. That would prevent Gazprom from paying Ukraine transit fees, which analysts say could end Russian gas flows to Europe via the country.
Yuriy Vitrenko, the chief executive of Naftogaz, says the company will continue with its arbitration proceedings against Gazprom regardless.
Natasha Fielding, head of EMEA gas pricing at Argus Media, said that Sanctions would make the worst-case scenario that European governments have been preparing for all summer, a European gas market without Russian gas.
She said that the transit through Ukraine is the only Russian gas delivery route to Europe still in use besides the Turkish Stream pipeline, which serves southeast European countries.
Dutch wholesale gas prices, the European benchmark, went up after Gazprom talked of sanctions on Tuesday, but rallied as much as 13% on Wednesday to stand around 120% higher since the start of the year.
Gas flows via the only operational Ukrainian transit route through Sudzha are currently around 42 million cubic metres a day. In May, Kyiv had already suspended the Sokhranivka route, which delivered nearly a third of the fuel from Russia to Europe through Ukraine, declaring force majeure.
After they were cut to a fraction of capacity last month, leaks detected on the Nord Stream 1 pipeline make a resumption of flows on that route unlikely to happen again, with Moscow citing the need for maintenance.
The Yamal-Europe pipeline has been flowing eastbound from Germany to Poland for much of the year, although it has been in stop-start mode for weeks.
If the Sudzha flows come to a halt, the only Russian gas piped to Europe would be via Turkey and the Black Sea through TurkStream, which has an annual capacity of around 31.5 billion cubic metres.
In August, Gazprom increased supply to Hungary via the pipeline, but Europe has been preparing for a complete stop to Russian gas deliveries this winter.
Governments are trying to diversify supply, buy more liquefied natural gas from suppliers such as the United States, Qatar and Egypt, as well as introduce measures to curb demand domestically and save energy.
As of Sept. 26, European gas storage was 88% full, although there are differences between countries.
Norbert R cker, head of economics and next generation research at the investment bank Julius Baer said that there needs to be a combination of 'ifs' to threaten Europe's energy supplies this winter, including a cold winter, prolonged French nuclear outages, and other infrastructure issues.
Countries will end the winter gas season this year with very low stocks and have less Russian pipeline gas available than ever before to replenish stocks in the spring and summer, which will create a greater risk for next winter as countries will have less Russian pipeline gas available than ever before to replenish stocks.