Europe scrambles for gas solution as Putin squeezes supply

The European Union is racing to find alternative suppliers of natural gas after Russia’s Gazprom cut flows to two EU nations, sparking fears that others will soon follow.

The developments come as Brussels is fearful about nations and energy firms circumventing strict international sanctions on Russia — imposed on Moscow in the wake of its unprovoked invasion of Ukraine.

Gazprom, Russia’s state-owned energy firm, cut supplies of natural gas to Poland and Bulgaria earlier this week, after both nations refused to pay for the commodity in rubles — something that President Vladimir Putin requested amid growing Western support for Ukraine.

The decision puts further pressure on the EU, which imports roughly 40% of all its natural gas from Moscow, to find alternative solutions.

“It contributes to opening the eyes of those who were still thinking Russia would not use gas as a leverage,” one EU official, who did not want to be named due to the sensitive nature of the situation, told CNBC about Russia’s latest move.

European Commission President Ursula von der Leyen went further Wednesday, accusing the Kremlin of blackmailing the bloc.

Kremlin spokesman Dmitry Peskov dismissed accusations that Moscow was using its gas supplies to blackmail European nations Poland and Bulgaria, saying Russia was a reliable energy supplier. He also declined to say how many countries had agreed to switch to paying for gas in rubles, Reuters reported.

But the pressure could escalate if Gazprom chooses to cut supplies to other EU nations. The Kremlin warned Wednesday that other countries will face the same issue if they do not pay in rubles — something that the commission, the executive arm of the EU, opposes as it would breach current sanctions.

“Russia’s move to halt gas flows to Poland followed Berlin’s decision—under intense political pressure—to supply Ukraine with air-defense weaponry. The implied threat is that Russia will cut off Germany’s gas supplies if Berlin continues to ship arms to Ukraine,” analysts at Gavekal, a financial research firm, said in a note Thursday. “The economic effects would be catastrophic,” they added.

As such, the commission has been working on becoming less dependent on Russian gas. It signed an agreement with the United States, earlier this year, where the EU will receive at least 15 billion cubic meters of liquefied natural gas this year.

“We are working hand in hand with our Member States to secure alternative gas supply from other partners, too,” von der Leyen also said Wednesday.

In the meantime, Brussels will have to decide how to keep paying for Russian natural gas without breaching the bloc’s own rules. Russia issued a decree in late March saying European companies will continue to pay…