Ukraine has for the first time since the war began cutting off Russian gas supply through one of the pipelines passing through its territory.
According to some experts Ukraine has been angry with the EU as the region continues to buy Russian oil and gas which Kyiv sees as generating money for Moscow to finance the ongoing war.
An AP report cited Tim Ash, senior emerging markets sovereign strategist at BlueBay Asset Management, as saying Ukraine’s move could be about forcing Europe’s hand.
“I think frustrations are building in Ukraine that Europe is proving too slow in rolling out an energy embargo on Russia,” he said. “If Europe is not prepared to shut off the energy money printing machine for Moscow, why would Ukraine not take matters into their own hands?
The operator of the gas pipeline system, Gas TSO of Ukraine, claimed on Wednesday it could no longer transport gas through a compressor station in the Luhansk region. The company claimed the occupying Russian forces were interfering in the station’s operation and diverting gas in a way that endangered the stability of the pipeline system.
The pipeline handles around a third of Russian gas flowing to Europe and any disruption in supply would lead to speculation and a rise in prices.
Economists estimate that if Russian oil and gas supplies were to be completely cut off this would lead to a recession in Europe. A loss of gas would hit industries such as metals, fertilizer, glass and ceramics. Households would also have to shell out more for electricity bills as gas prices would shoot up.
Due to this European countries have been holding back on boycotting Russian oil and gas despite enormous pressure from the USA and Ukraine.
While Russia has itself halted natural gas to Poland and Bulgaria over a dispute about payments in roubles Wednesday’s cutoff is the first disruption in gas supplies flowing through Ukraine due to the war.
Energy experts are of the view the interruption would make it harder for European countries to meet their targets for storage levels.
However, as the European gas grid is well integrated, no one country is likely to suffer any immediate impact. But the disruption is expected to lead to more speculation in the market which is destabilising and firms up prices.
Also read: In for a long haul in Ukraine, Russia builds support for a united front against US and its allies
