Finland lost major gas supplies after refusing to pay the ruble

(Bloomberg) – Russia is cutting off its natural gas supplies to Finland due to strained relations between the two neighbors over its decision to join the Nordic defense alliance NATO.

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Finland is the third European country to lose gas from Russia after refusing to pay for fuel in rubles. A major pipeline from one of the region’s top suppliers will be cut off early Saturday, according to a filing by Finnish importer Gasum Weir. Poland and Bulgaria shut down their taps last month for the same reason.

Tom Marjek-Manser, head of gas analytics at ICIS, said: “Most in the market expect Finland to be the only buyer to cut deliveries at this time, but there is a risk that buyers elsewhere could suffer the same consequences.” London, citing a recent survey of the company’s merchants.

The lost supply is likely to have a limited impact on the economy of the Nordic countries, which account for only 5% of the energy mix. It is mainly used by factories instead of heating like other European countries. The government has pushed for a quick exit from Russian fossil fuels.

“Gazprom Exports has informed Gasom that the supply of natural gas to Finland will be cut off from Saturday under the Gasum supply agreement,” the Finnish company said. “Gasum will supply natural gas to its customers from other sources through the Baltic connecting pipeline.”

Meanwhile, supplies continue to flow into Finland via the Baltic Connector Pipeline from Estonia, but its capacity may not be enough to meet demand. Since then a number of companies have already switched to other fuels or secured alternative supplies. For the coming winter, the government on Friday agreed to rent a floating LNG terminal together with Estonia.

“The new LNG ship is an important step in improving the security of power supplies in Finland,” Finance Minister Anika Sariko told reporters on Friday. “It simply came to our notice then. The importance of the project cannot be overemphasized now. ”

Although this is a relationship from five decades ago, Finland is a relatively small client for Gazprom. In the first half of last year, about 1% of the company’s combined sales in Europe and Turkey were exports to Russia’s western neighbors.

The North Atlantic Treaty Organization (NATO) with Sweden was suspended a week after Russia ended its sale of electricity to Finland in line with its decision to join the organization. Russia has said it will not comment on the details of the application.

European benchmark gas futures changed slightly on Friday, heading for a weekly 6.2% decline. Prices have fallen since the Russian invasion of Ukraine, but are at a very high level.

Moscow claims

European countries have been divided over how to handle Moscow’s demand since the end of March that all payments for fuel should be made in rubles, and utilities have responded differently to the challenge. Russia said on Thursday that Gazprom had accepted the request of about half of PJSC’s foreign clients and opened a ruble account, without naming any company.

Russia’s pipeline recently accounted for about 66% to 75% of Finland’s supplies. Russian gas exports to Finland have been declining since 2018, when shipments were about 2.6 billion cubic meters. In 202O they had a 39% reduction.

Russia’s supply cut grid operators are set to launch the market steering system, which means it could flow rations to users. Finland also has stored fuel, which can be fed into the network if the pressure is otherwise too low. Fuel prices could rise further as supply declines.

The biggest user is Neste Oyj, which uses fuel to produce the hydrogen needed for its oil refining operations, afforestation companies and steel mills.

(Updated with the comment of the analyst in the third paragraph.)

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