Gazprom To Cut Ties With Germany As Energy Relations Sour

Published on

Russian energy giant Gazprom PAO (MCX:GAZP) has announced it will stop doing business in Germany as economic tensions between the countries have reached boiling point. President Vladimir Putin signed a decree Thursday that forces Germany and other “unfriendly countries” to pay for gas in rubles.

Hostile Environment

As reported by Reuters, Gazprom did not reveal the reasons to end its participation in Gazprom Germania GmbH and all included assets, which comprises businesses in Britain, Switzerland, and the Czech Republic.

Q4 2021 hedge fund letters, conferences and more

European Union regulators had accused the Russian energy giant of holding back gas distribution, prompting prices to go up. The company denied these claims and said antitrust authorities had raided its offices in Germany.

Katja Yafimava, senior research fellow at the Oxford Institute for Energy Studies, says: “I think this means Gazprom is drawing a curtain on being an active participant in the European gas market. Essentially it is going home because it no longer feels welcome.”

She further explained Gazprom understands it is facing a hostile political and regulatory environment in the continent and thus wants to consolidate and conduct all of its operations in St Petersburg, “most likely with the political support of the Russian government.”

Payments Scramble

Germany has rejected Vladimir Putin’s ruble payments decree since current agreements are set in euros. Economy Minister Robert Habeck said in a statement Thursday that Berlin would not be “blackmailed by Putin.”

Habeck also issued an “early warning” to its people should Russia cut natural gas supply amid the payments scramble.

Russia provides 40% of the gas Germany utilizes, so the latter’s decision to join and support Western sanctions against the Eurasia giant over the Ukraine invasion has not gone down well in Moscow.

Germany halted the Nord Stream 2 Baltic gas pipeline designed to double the flow of Russian gas direct to the country, Reuters reports.

Since the supply of natural gas remains in limbo, the German economy ministry is pondering expropriating Gazprom and NK Rosneft’ PAO (MCX:ROSN) units in the country, which, according to Moscow, would be a violation of international law.