# Gazprom gas cut tempers economic hopes after Ukraine grain deal
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-07-25
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Russia Cuts Gas Supply to Europe Amid Ukraine Conflict
Meta Description: Russia's decision to cut gas supplies to Europe through Nord Stream 1 threatens energy prices and impacts global wheat shortage due to the conflict with
URL: https://financedigest.com/gazprom-gas-cut-tempers-economic-hopes-after-ukraine-grain-dealhtml

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By Pavel Polityuk and Max Hunder

KYIV (Reuters) – Russia dealt a new blow to European countries over their support for Ukraine on Monday, saying it would further cut gas supplies through its single biggest gas link to Germany.

The move came as the first ships to export grain from Ukraine’s Black Sea ports under a deal agreed last week could set sail within days, bringing a measure of hope to countries reliant on such food supplies even though the situation is still clouded by mistrust and potential danger.

Both developments showed how the conflict – now in its sixth month and with no resolution in sight – is having an [economic impact](https://www.financedigest.com/dollar-skids-after-soft-u-s-economic-data-impact-of-opec-cuts-fades.html "Dollar skids after soft U.S. economic data; impact of OPEC+ cuts fades") way beyond the battlefields of Ukraine.

On the frontlines, the Ukrainian [military reported](https://www.financedigest.com/australia-to-investigate-reports-pilots-trained-chinese-military-minister.html "Australia to investigate reports pilots trained Chinese military – minister") widespread Russian artillery barrages in the east overnight and said Moscow’s troops were preparing for a new assault on Bakhmut, a city in the industrial Donbas region.

Russian President Vladimir Putin warned the West earlier this month that sanctions imposed on his country for its invasion of Ukraine [risked triggering huge energy](https://www.financedigest.com/britains-tax-take-risks-blowing-green-energy-off-target.html "Britain’s tax take risks blowing green energy off target") price rises for consumers around the world.

On Monday, Russian energy giant Gazprom, saying it was acting under the instructions of an industry watchdog, said flows through the [Nord Stream](https://www.financedigest.com/denmark-invites-nord-stream-operator-to-help-salvage-unidentified-object.html "Denmark invites Nord Stream operator to help salvage unidentified object") 1 pipeline would fall to 33 million cubic metres per day from Wednesday.

That is [half of the current](https://www.financedigest.com/more-than-half-of-workers-are-open-to-leaving-their-current-employers.html "MORE THAN HALF OF WORKERS ARE OPEN TO LEAVING THEIR CURRENT EMPLOYERS") flows, which are already only 40% of normal capacity. Prior to the war Europe [imported about 40% of its gas and 30% of its oil from Russia](https://www.financedigest.com/biden-bans-russia-oil-imports-to-u-s-warns-u-s-gasoline-prices-will-rise-further.html "Biden bans Russia oil imports to U.S., warns U.S. gasoline prices will rise further").

The Kremlin says the gas disruption is the result of maintenance issues and Western sanctions, while the [European Union has accused Russia of resorting to energy](https://www.financedigest.com/european-governments-spend-half-a-trillion-euros-on-energy-crisis-report.html "European governments spend half a trillion euros on energy crisis – report") blackmail.

Germany said it saw no technical reason for the latest reduction.

Politicians in [Europe have repeatedly said Russia could cut](https://www.financedigest.com/tesla-expands-discounts-with-price-cuts-in-europe-singapore-israel.html "Tesla expands discounts with price cuts in Europe, Singapore, Israel") off gas this winter, a step that would thrust Germany into recession and lead to soaring prices for consumers already faced with painfully high energy costs. The Kremlin has said Moscow is not interested in a complete stoppage of gas supplies to Europe.

[GRAIN SHIPS](https://www.financedigest.com/turkey-says-five-more-grain-ships-leave-ukrainian-ports.html "Turkey says five more grain ships leave Ukrainian ports")

[Rising energy prices](https://www.financedigest.com/oil-prices-rise-on-u-s-drawdown-chinese-fears-weigh.html "Oil prices rise on U.S. drawdown, Chinese fears weigh") and a global wheat shortage are among the most far-reaching effects of Russia’s invasion of Ukraine. They threaten millions in poorer countries, especially in Africa and the Middle East, with hunger.

[Ukraine said on Monday it hoped](https://www.financedigest.com/new-talk-of-compromise-on-both-sides-lifts-hope-for-russia-ukraine-breakthrough.html "New talk of compromise on both sides lifts hope for Russia-Ukraine breakthrough") a U.N.-brokered deal to try to ease the [food shortages](https://www.financedigest.com/we-are-going-to-die-food-shortages-add-to-sri-lankas-woes.html "‘We are going to die’: Food shortages add to Sri Lanka’s woes") by resuming grain exports from Black Sea ports would start to be implemented this week.

Officials from Russia, Turkey, Ukraine and the [United Nations agreed on Friday there would be no attacks on merchant ships moving through the Black Sea](https://www.financedigest.com/offshore-crews-to-strike-on-bps-north-sea-installations-says-unite.html "Offshore crews to strike on BP’s North Sea installations, says Unite") to Turkey’s Bosphorus Strait and on to markets.

Moscow brushed aside [concerns the deal could be derailed by a Russian](https://www.financedigest.com/oil-gains-as-russian-supply-cuts-temper-concerns-over-rate-hikes-high-stocks.html "Oil gains as Russian supply cuts temper concerns over rate hikes, high stocks") missile strike on Ukraine’s port of Odesa on Saturday, saying it targeted only military infrastructure.

Russia’s Black Sea fleet has blocked grain exports from [Ukraine since](https://www.financedigest.com/euro-zone-economy-sentiment-rises-in-dec-first-time-since-start-of-ukraine-war.html "Euro zone economy sentiment rises in Dec, first time since start of Ukraine war") Moscow’s Feb. 24 invasion.

Moscow denies responsibility for the food crisis, blaming [Western sanctions for slowing its food and fertiliser exports and Ukraine](https://www.financedigest.com/analysis-russian-gold-removed-from-some-western-funds-after-ukraine.html "Analysis-Russian gold removed from some Western funds after Ukraine") for mining the approaches to its ports.

Under Friday’s deal, pilots will guide ships along safe channels.

A Ukrainian government official said he hoped the first [grain shipment from Ukraine](https://www.financedigest.com/traders-cut-ukraine-2022-combined-grain-and-oilseeds-crop-forecast.html "Traders cut Ukraine 2022 combined grain and oilseeds crop forecast") could be made from Chornomorsk this week, with shipments from other ports within two weeks.

We believe that over the next 24 hours, we will be ready to work to resume exports from our ports,” deputy [infrastructure minister](https://www.financedigest.com/exclusive-russian-invasion-damaged-up-to-30-of-ukraines-infrastructure-says-minister.html "Exclusive-Russian invasion damaged up to 30% of Ukraine’s infrastructure, says minister") Yuriy Vaskov told a news conference.

A United Nations spokesperson, speaking in New York, said the first ships may move within a few days. A Joint Coordination Center will liaise with the shipping industry and publish detailed procedures for [ships in the near](https://www.financedigest.com/oil-spills-and-near-misses-more-ghost-tankers-ship-sanctioned-fuel.html "Oil spills and near misses: more ghost tankers ship sanctioned fuel") future, he said.

[Russian Foreign Minister](https://www.financedigest.com/permitted-share-of-chinas-yuan-in-russian-wealth-fund-doubled-to-60-finance-minister.html "Permitted share of China’s yuan in Russian wealth fund doubled to 60% -Finance Minister") Sergei Lavrov, speaking during a tour of African countries, said there were no barriers to the export of grain and nothing in the deal prevented Moscow from attacking military infrastructure in Ukraine.

The Kremlin also said the United Nations must ensure curbs on Russian fertiliser and other exports were lifted for the grain [deal to work](https://www.financedigest.com/eu-us-working-on-deal-to-make-ev-minerals-eligible-for-tax-credits-eu-official.html "EU, US working on deal to make EV minerals eligible for tax credits -EU official").

Before the invasion and subsequent sanctions, Russia and [Ukraine accounted for nearly a third of global wheat exports](https://www.financedigest.com/ukraine-grain-export-coordination-centre-opens-in-istanbul.html "Ukraine grain export coordination centre opens in Istanbul").

AIR STRIKES

Putin calls the [war a “special military operation” aimed at demilitarising Ukraine](https://www.financedigest.com/ukraine-grants-citizenship-to-top-russian-journalist-who-denounced-war.html "Ukraine grants citizenship to top Russian journalist who denounced war") and rooting out dangerous nationalists who he says threaten Russia’s security. The Kyiv government and the West call this a baseless pretext for an aggressive land grab.

Thousands of people – many of them civilians – have been killed and several [million people have fled their homes for safer parts of Ukraine](https://www.financedigest.com/close-to-3-million-have-fled-fighting-in-ukraine.html "Close to 3 million have fled fighting in Ukraine") or overseas.

Russian artillery barrages and air [strikes have pulverised whole cities](https://www.financedigest.com/russia-strikes-cities-across-ukraine-gas-supplies-in-focus.html "Russia strikes cities across Ukraine, gas supplies in focus"). With Western weapons supplies boosting the Ukrainians, Putin’s [forces are making slow progress but they are believed to be readying for a new push](https://www.financedigest.com/ukraine-pushes-russian-forces-back-restricts-gas-flow-to-europe.html "Ukraine pushes Russian forces back, restricts gas flow to Europe") in the east.

[Ukraine said on Monday its forces](https://www.financedigest.com/russia-seizes-ukraine-nuclear-power-plant-as-forces-lay-siege-to-cities.html "Russia seizes Ukraine nuclear power plant as forces lay siege to cities") had used U.S-supplied HIMARS rocket systems to destroy 50 [Russian ammunition depots since receiving the weapons last month](https://www.financedigest.com/russian-services-activity-shrinks-for-third-month-running-in-dec-pmi.html "Russian services activity shrinks for third month running in Dec -PMI"). Russia did not comment but its Defence Ministry said its forces had destroyed an ammunition depot for HIMARS systems.

[Ukraine’s General Staff said in its evening report on Monday Russia war](https://www.financedigest.com/analysis-action-wanes-at-u-n-to-isolate-russia-almost-six-months-into-ukraine-war.html "Analysis: Action wanes at U.N. to isolate Russia almost six months into Ukraine war") planes had struck at targets in Donetsk province, including near the Vuhlegirska thermal power station.

Reuters could not independently verify the Russian or Ukrainian statements.

(Reporting by Reuters bureaux; Writing by Philippa Fletcher and Angus MacSwan; Editing by Gareth Jones, Barbara Lewis and Alison Williams)


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