News Inputs assisted by Mike Baruah, Our North America Correspondent.
Russia will cut off natural gas to Finland after the Nordic country that applied for NATO membership this week refused President Vladimir Putin’s demand to pay in rubles, the Finnish state-owned energy company said Friday, the latest escalation over European energy amid the war in Ukraine.
( In what seems to be a contradictory statement albeit preplanned, to European dependance upon Russian Gas,
The Finnish company said the move by Russia would not cause disruptions in supplies.
Gasum said it will continue to provide Finnish customers with natural gas through the Balticconnector pipeline that connects Finland with Estonia.)
Finland is the latest country to lose the energy supply, which is used to generate electricity and power industry, after rejecting Russia’s decree. Poland and Bulgaria were cut off late last month but had prepared for the loss of natural gas or are getting supplies from other countries.
Putin has declared that “unfriendly foreign buyers” open two accounts in state-owned Gazprombank, one to pay in euros and dollars as specified in contracts and another in rubles. Italian energy company Eni said this week that it was “starting procedures” to open a euro and a ruble account.
The European Commission, the European Union’s executive arm, has said the system does not violate EU sanctions if countries make a payment in the currency listed in their contracts and then formally signal that the payment process is concluded. But it says opening a second account in rubles would breach sanctions.
That’s left countries scrambling to decide what to do next. Analysts say the EU stance is ambiguous enough to allow the Kremlin to keep trying to undermine unity among the 27 member countries — but losing major European customers like Italy and Germany would cost Russia heavily. It comes as Europe tries to reduce its dependency on Russian oil and gas to avoid pouring hundreds of millions into Putin’s war chest each day but build enough reserves before winters from scarce worldwide supplies.
Finland refused the new payment system, with energy company Gasum saying its supply from Russia would be halted Saturday.
CEO Mika Wiljanen called the cutoff “highly regrettable.”
But “provided that there will be no disruptions in the gas transmission network, we will be able to supply all our customers with gas in the coming months,” Wiljanen said.
Natural gas accounted for just 6% of Finland’s total energy consumption in 2020, Finnish broadcaster YLE said. Almost all of that gas came from Russia. That pales in comparison to big importers like Italy and Germany, which get 40% and 35% of their gas from Russia, respectively.
According to Finland’s Gasum, Russian state-owned energy giant Gazprom said in April that future payments in its supply contract must be made in rubles instead of euros.
The cutoff was announced the same week that Finland, along with Sweden, applied to join the NATO military organisation, marking one of the biggest geopolitical ramifications of the war that could rewrite Europe’s security map.
The government in Helsinki said Friday that it had signed a 10-year lease for a floating liquefied natural gas terminal in the Gulf of Finland and that necessary port structures will be built along the coasts of the Nordic country and Estonia, Economy Minister Mika Lintila said in a statement.
It “will play a major role in securing gas supplies for Finland’s industry,” Lintila said. The vessel should be ready to operate by next winter.
Finland and Estonia have been cooperating on renting the LNG terminal ship, which will provide enough storage and supply capacity to allow Russian gas to be abandoned in the neighbouring countries, said Gasgrid Finland, the transmission network company. A gas pipeline between the neighbours will make it possible to import gas from the Baltic states instead of Russia.
Meanwhile, Italian company Eni said Tuesday that it was moving to follow Putin’s decree “in view of the imminent payment due in the coming days” but did not agree with the changes.
Italian Premier Mario Draghi has said he believes it is a violation of the contract, and has called on the European Commission to make a ruling so companies know if compliance violates sanctions.
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Additional News Inputs.
Russia will cut flows of natural gas to Finland on Saturday, Finnish state-owned energy wholesaler Gasum has said.
It said on Friday that they had been informed by Russia’s state-owned energy corporation Gazprom that the flows would be halted.
The Finnish company said the move by Russia would not cause disruptions in supplies.
The gas cutoff – which is scheduled to take place at 04:00 GMT on Saturday – comes in the wake of Finland and Sweden applying to join the NATO military alliance amid security concerns spurred by the Russian invasion of Ukraine.
Gasum said it will continue to provide Finnish customers with natural gas through the Balticconnector pipeline that connects Finland with Estonia.
Earlier on Friday, Finland announced a 10-year agreement with US-based Excelerate Energy to lease a floating storage and delivery vessel to provide liquefied natural gas to the region.
While the majority of gas used in Finland comes from Russia, the fossil fuel only accounts for between five to eight percent of the country’s annual energy consumption.
‘Far-reaching consequences’
Gazprom did not immediately comment on the cutting of gas supplies to Finland, but Kremlin spokesman Dmitry Peskov said that while Moscow did not have detailed information regarding Gazprom’s supply contracts, “obviously nothing will be supplied to anyone for free”.
On Sunday, RAO Nordic, a subsidiary of Russian state energy holding Inter RAO, cut off electricity supply to Fingrid, Finland’s electricity grid operator, citing concerns over payment. Fingrid said the reduced power supply would be compensated for with increased domestic output and imports from Sweden.
Finland and Sweden on Thursday broke their historic policies of neutrality and officially applied to join NATO, although their joint application will need to overcome opposition from Turkey.
Moscow has repeatedly warned Finland, which shares a 1,340km (830 mile) border with Russia, of “far-reaching consequences” in response to its bid to join the military bloc.
Russian defence minister Sergei Shoigu announced on Friday that Moscow would establish 12 new military units and divisions in the western region of the country, citing the possible expansion of NATO and other emerging military threats.
