2022 Russia–European Union gas dispute

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  Europe TTF natural gas
Nord Stream gas flows[1]
Russia cut the flow of natural gas by more than half in June because they said they could not get a part seized by the Canadian government because of sanctions.[2]
Russia halted gas flows July 11th for annual maintenence for 10 days and was back flowing July 21st[3]
Russia stopped the flow of natural gas on 2 September 2022 for maintenance for 3 days, but presumably not restarting it.[4]

The Russia–EU gas dispute flared up in March 2022 following the invasion of Ukraine that occurred in late February as Russia and the major EU countries clashed over the issue of payment for pipeline natural gas exported to Europe by Russia's Gazprom.


Major natural gas pipelines from Russia to Europe
Sources of European natural gas, 2010–2017. Russia (dark brown) was the source of 35% of total EU natural gas consumption in 2017.

Europe consumed 512 billion cubic metres (bcm) of natural gas in 2020, of which 185 bcm (36%) came from Russia.[5] In early 2022, Russia supplied 45% of EU's natural gas imports, earning $900 million a day.[6]

Following Russia's invasion of Ukraine in February 2022, the United States, the European Union,[7] and other countries,[8] introduced or significantly expanded sanctions to cut off "selected Russian banks" from SWIFT,[9] Those assets of the Central Bank of Russia that were held in Western nations were frozen: the Central Bank of Russia was blocked from accessing more than $400 billion in foreign-exchange reserves held abroad.[10][11] Accounts in Western banks that are owned by Gazprom were also frozen. Any money deposited into these frozen Gazprom accounts − including payments for natural gas − would also be frozen.

The Biden administration had initially allowed Russia to continue to repurpose the substantial funds it had kept in U.S. financial institutions to make due payments on Russia's sovereign debt. But on 4 April, the U.S. Department of the Treasury banned Russia from withdrawing funds held in U.S. banks to pay off its debt obligations.[12] Russia, which in early 2022 held $630 billion in foreign-exchange reserves,[13] was consequently unable to make payments on its debt in US dollars or Euros as it was contractually required to do.

Two dollar denominated bonds issued by Russian government matured on 4 April 2022.[14] On 5 April, Russia attempted to pay its bond holders with dollars from $600M of reserves held in U.S. banks but these were blocked by the U.S. government as part of the Western sanctions.[15] In April 2022 Russia defaulted on its foreign debt by failing to pay its obligations in U.S. dollars. The credit agency S&P Global stated that Russia was in "selective default" because it tried to pay obligations on dollar denominated debt in rubles, which could not be converted into "dollars equivalent to the originally due amounts".[14][16][17]

In response to the invasion of Ukraine by Russia, the European Commission and International Energy Agency presented joint plans to reduce reliance on Russian energy, reduce Russian gas imports by two thirds within a year, and completely by 2030.[18][19] In April 2022, European Commission President Ursula von der Leyen said "the era of Russian fossil fuels in Europe will come to an end".[20] On 18 May 2022, the European Union published plans to end its reliance on Russian oil, natural gas and coal by 2027.[21]

Demand of payment in rubles[edit]

EUR/Ruble exchange rate

As a response to a new round of severe sanctions introduced by the EU countries against Russia, Russian President Vladimir Putin on 23 March 2022 announced that he had made a decision whereby payments for Russian pipeline gas would be switched from "the currencies that had been compromised" (US dollar and euro) to payments in roubles vis-à-vis the previously formally designated "unfriendly countries", including all European Union states; on 28 March, he ordered the Central Bank of Russia, the government, and Gazprom to present proposals by 31 March for gas payments in rubles from "unfriendly countries".[22][23][24] President Putin's move was construed to be aimed at forcing European companies to directly prop up the Russian currency as well as bringing Russia's Central Bank back into the global financial system after the sanctions had nearly cut it off from financial markets.[25] ING bank's chief economist, Carsten Brzeski, told Deutsche Welle he thought the gas-for-ruble demand was "a smart move".[25] At the end of April 2022, Russian Foreign Minister Sergey Lavrov said that the $300 billion of Gazprom's funds that had in effect been "stolen" by the "Western 'friends'" were actually the funds they had paid for Russia's gas, which meant that all those years they had been consuming the Russian gas free of charge; he thus made a point that the new payment system was designed to preclude "the continuation of the brazen thievery those countries were involved in".[26]

On 28 March, Germany's Economy Minister Robert Habeck announced that the Group of Seven countries had rejected Russian President's demand that payment for gas be made in rubles.[27] On the same day, Russian president's spokesman, Dmitry Peskov, said that Russia would "not supply gas for free".[28]

In the evening of 29 March, it was reported that the physical gas flows through the Yamal-Europe pipeline at Germany's Mallnow point had fallen to zero.[29] The following day, Germany's Economy and Climate Minister Robert Habeck triggered the "early warning" level for gas supplies, the first step of a national gas emergency plan that involved setting up a crisis team of representatives from the federal and state governments, regulators and private industry and that could, eventually, lead to gas rationing; he urged Germans to voluntarily cut their energy consumption as a way of ending the country's dependence on Russia.[30][31] A similar step was undertaken by the Austrian government.[32] Meanwhile, Gazprom said it continued to supply gas to Europe via Ukraine. Russia's gas had also begun flowing westward through the pipeline via Poland.[31] Russia's TASS reported that President Putin had a phone call with Germany's Chancellor Olaf Scholz to "inform him on the decision to switch to payments in rubles for gas".[33] According to Olaf Scholz's office, President Vladimir Putin told the German Chancellor that European companies could continue paying in euros or dollars.[34]

Decree 172[edit]

On 31 March, President Vladimir Putin signed a decreedecree 172 − that obligated, starting 1 April, purchasers of Russian pipeline gas from countries on Russia's Unfriendly Countries List[35] to make their payments for Russian gas through a facility run by Russia's Gazprombank, a subsidiary of Gazprom.[36][37][38] To pay for gas, purchaser companies from "unfriendly countries" would be required to open two accounts at Gazprombank and transfer foreign currency in which they previously made payments into one of them,[39][36] which Gazprombank would then sell on the Moscow Stock Exchange for rubles that are deposited into the second (foreign-purchaser owned) ruble-denominated account[40] (this currency conversion would be done in Russia).[37][36] Gazprombank would then transfer this ruble payment to Gazprom PJSC (a company that operates gas pipeline systems, produces and explores gas, and transports high pressure gas in the Russian Federation and European countries[41]), at which point the purchaser would be deemed to have legally fulfilled (under Russian law) its obligations to pay.[35] Gas purchasers were thus still able to make payments by transferring foreign (non-ruble) currencies, including the currencies stipulated by their contract,[37] which in most cases were US dollars and Euros. Despite this, the obligatory new payment mechanism introduced by decree 172 has been colloquially referred to as a "demand to pay in rubles" by many media outlets.[36]

The natural gas contracts stipulated the currency in which payments to Gazprom were to be made[36] − 97% of which were in US dollars or euros[39] − as well as the accounts into which the payments were to be deposited, which were Gazprom-owned accounts at Western financial institutions. These accounts had been frozen by Western sanctions and any payments deposited into these accounts would also be immediately frozen, whereas payments deposited into these Gazprombank accounts (located in Russia) would be accessible to Gazprom, which would circumvent these Western sanctions.[39][42]

The first post-April 1 payments were due near the end of April and in May.[37] Putin stated that any country refusing to use the new payment mechanism would be in violation of their contracts and face "corresponding repercussions".[36] The Russian government would consider a failure to pay to be a default and the existing contract would be terminated. The decree allowed exceptions to be made for buyers that would permit them to pay as before.

On 29 April 2022, Germany's Economy Ministry clarified that European energy companies won't be in breach sanctions if they comply with decree 172, saying in an emailed statement that "According to these guidelines, account K, to which payment is made in euros/dollars, is in line with the sanctions if companies declare that contracts have been fulfilled with payment in euros or dollars."[43]

Gas deliveries disruption[edit]

On 26 April 2022, Gazprom announced it would stop delivering natural gas to Poland via the Yamal–Europe pipeline and to Bulgaria from the following day as both country had failed to make due payments to Gazprom in rubles.[44][45] Poland said it did not expect to experience disruptions due to its natural gas storage facilities being about 75% full (ensuring 40–180 days of supply), the Poland–Lithuania gas pipeline becoming operational in May 2022, and the Baltic Pipe natural gas pipeline between Poland and Norway becoming operational in October 2022, which would make Poland fully independent of Russian gas.[44][45] Poland could also import gas via the Świnoujście LNG terminal in the city of Świnoujście in the country's extreme north-west. Meanwhile, Bulgaria was almost completely dependent on Russian gas.[45]

The following day, Gazprom announced that it had "completely suspended gas supplies" to Poland's PGNiG and Bulgaria's Bulgargaz "due to absence of payments in roubles".[46] Bulgaria, Poland, and the European Union condemned the suspension.[47] The announcement of the suspension caused natural gas prices to surge[37] and the Russian ruble to reach a 2 year high against the Euro in Moscow trade.[48]

On 11 May 2022, Ukraine's state-owned gas grid operator GTSOU halted the flow of natural gas through the Sokhranovka transit point, which had transported about one third of all of piped Russian natural gas that transited through Ukraine.[49] It was the first time since the start of Russia's 24 February invasion of Ukraine that natural gas flow through Ukraine was interrupted.[49] The Ukrainian government stated that it would not reopen this pipeline unless it regained control of areas from pro-Russian fighters.[50] On the same day, Russia imposed sanctions on European subsidiaries of Gazprom.[51]

On 20 May 2022, Gazprom announced that it had informed Finland that beginning 4:00 GMT the next morning (on 21 May), natural gas deliveries to the country would be halted due to the refusal of the Finnish state-owned gas wholesaler to pay in rubles (that is, to comply with decree 172).[52] Natural gas accounted for 5% of Finland's total annual energy consumption, with the majority of this natural gas being supplied by Russia.[52]

On 14 June 2022, Gazprom has announced it will be slashing gas flow via the Nord Stream 1 pipeline, due to what it claimed was Siemens’ failure to return compressor units on time that had been sent off to Canada for repair. The explanation was challenged by Germany's energy regulator.[53][54]

On 16 June 2022, European benchmark natural gas prices increase by around 30% after Russia's Gazprom reduced Nord Stream 1's gas supply to Germany to 40% of the pipeline's capacity. Russia blames maintenance problems resulting from Canada's refusal to return equipment that was sent for repair and warns that usage of the pipeline could be completely suspended.[55]

On 11 July 2022, Nord Stream I has been completely turned off for maintenance reasons. [56] The Siemens pipeline turbine have been repaired in Canada. Due to the sanction, Canada could not deliver the turbine back to Russia after reparation and send it to Germany instead, despite the call of Volodymyr Zelenskiy, Ukraine to maintain the sanction.[57] It is still uncertain if the transit will start again at the end of the maintenance period (27 July 2022).


A July 2022 report from three Germany science academies noted that if Russian natural gas imports were to cease in the next few months, around 25% of Europe's natural gas demand could not be met at peak times for a winter similar to that in 2021 — moreover that shortfall is due to a lack of transport infrastructure such as pipeline capacity and LNG terminals and that this supply gap can be closed by 2025 if natural gas consumption falls by 20% across Europe and infrastructure is expanded simultaneously.[58]

A fully open study from Zero Lab, Princeton University published in July 2022 and based on the GenX framework concluded that reliance on Russia gas could end by October 2022 under the three core scenarios they investigated — which ranged from high coal usage to accelerated renewables deployment.[59][60] All three cases result in falling greenhouse gas emissions, relative to business as was usual.[59]: 7 


Responding to Europe's shift of energy imports, Peru increased its exporting of liquified natural gas to Europe, especially to Spain and the United Kingdom.[61] In the first five months of 2022, its liquified natural gas exports increased 74% compared to the same period in 2021.[61]

On 20 May 2022, Germany and Qatar signed a declaration to deepen their energy partnership. Qatar plans to start supplying LNG to Germany in 2024.[62]

However, the total and operational capacity of global LNG tanker fleet as of 2021 is approximately 103 million cubic meters and was already operating at full capacity before the 2022 gas disputes. The UK and EU consume about 550 million cubic meters of gas. In addition although the UK has 3 LNG terminals for gasification much of the EU has insufficient to meet its needs due to insufficient tankers.

On 15 June 2022, Israel, Egypt and the European Union signed a trilateral natural gas agreement.[63]

With European policy-makers deciding to replace Russian fossil fuel imports with other fossil fuels imports and European coal energy production,[64][65] as well as due to Russia being "a key supplier" of materials used for "clean energy technologies", the reactions to the war may also have an overall negative impact on the climate emissions pathway.[66]

On 20 June 2022, Dutch climate and energy minister Rob Jetten announced that the Netherlands would remove all restrictions on the operation of coal-fired power stations until at least 2024 in response to Russia's refusal to export natural gas to the country. Operations were previously limited to less than a third of the total production.[67]

See also[edit]


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