Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented to Forbes on the possible consequences of cutting off Poland and Bulgaria from Russian gas supplies.
Although the volume of deliveries to Bulgaria and Poland is not large, something significant is important, Gromov says. An economic "casus belli" has been created for the entire system of long-term contracts, he notes.
According to the expert, Gazprom's limitation of gas supplies creates a precedent for changing other terms of long-term contracts. The first thing that both Bulgaria and Poland can do in this situation is to apply to the Stockholm Arbitration Court with a demand to punish Russia and Gazprom for violating the terms of long-term contracts. It is likely that the arbitration will take the side of the plaintiffs. Further, the Europeans may demand a revision of other long-term contracts, such as the "take or pay" clause, according to which 80% of the contracted gas must be purchased, Gromov said.
If large European countries (Italy, Germany or France) announced their refusal to pay for gas in rubles proposed by Russia, then the volume of supplies that Russia had to put somewhere would be significant and this would be a problem, says Gromov. Volumes of deliveries that Bulgaria and Poland will not receive can easily be redirected to Gazprom's underground storage facilities in Russia, especially since Gazprom has already announced plans to fill storage facilities in Russia to the maximum, he said.
According to Gromov, other European countries are unlikely to follow Poland and Bulgaria.
“I expect that the European Commission will condemn the decision of Gazprom, of course, there will be legal proceedings. But the large EU economies dependent on Russian gas (Germany, France, Italy) will agree, I think, albeit on a temporary basis, with the terms of payment proposed by Russia,” says Gromov.
“But if a chain reaction starts, there is a refusal of other countries and a corresponding restriction of supplies, then gas prices in Europe will rise very quickly and sharply. That is, we can expect figures close to $2,000 per 1,000 cubic meters,” the expert believes.
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