Russia turns off gas supplies to Poland and Bulgaria as the first step to show its intent require payment in rubles for sales of natural gas to “unfriendly” countries. The contracts for these natural gas sales called for payment in US dollars or Euros, depending on the individual contract, and requiring payment in rubles is a breach of those contracts, but clearly Russia is conducting a war, has determined that it has the position of control, and is not worried about legalities, as the buyers have little or no immediate recourse against Russia for breaching their contracts.
Russia Turns off Gas to Call Europe's Bluff Click To TweetRussia Turns off Gas to Call Europe’s Bluff
Germany, Italy, and other EU countries continue to purchase natural gas from Russia and pay for it in Euros and dollars, and intend to continue this payment method. By cutting off of Poland and Bulgaria, Putin is placing his initial bid in this high-stakes poker game and is hoping to convince the remaining EU countries that they are not bluffing.
Alternate Supplies and Storage Will Help
Other EU member countries are sending natural gas to Poland and Bulgaria from their own facilities, and there may be enough gas available from storage and alternate supplies for Europe to survive a full cutoff of Russian natural gas until late Autumn 2022. Additional liquified natural gas (LNG) from USA and other suppliers should extend this timeframe, but ultimately additional LNG terminals and ships will be needed to support large scale imports of LNG. A new gas pipeline from Poland to Norway, a new one from Bulgaria to Greece, a new LNG terminal in Poland, and LNG terminals constructed in Germany and other countries will help, but additional LNG ships take about 2 years to construct.
Europe Must Reduce Natural Gas Consumption
Europe depends on Russia for other energy supplies, including oil, coal, and some electrical power, and some trade-offs will need to be made to reduce all energy consumption, including natural gas, while alternative energy supplies and conservation methods are developed to ultimately replace Russian sources.
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