# Russia sanctions European gas companies, Polish part of gas pipeline
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-05-12
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Russia imposes sanctions on Gazprom Germania and EuRoPol
Meta Description: Discover the impact of Russia's sanctions on European gas supply and learn how it may affect the global energy market. Experts' insights included.
URL: https://financedigest.com/russia-sanctions-european-gas-companies-polish-part-of-gas-pipelinehtml

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(Reuters) – Russia has imposed sanctions against units of Gazprom Germania, in which its gas producer Gazprom ceded ownership, and also against EuRoPol GAZ SA, owner of the Polish part of the Yamal-Europe gas pipeline.

BACKGROUND:

The United States and its allies have imposed the most severe sanctions in modern history on Russia and Moscow’s business elite, steps that Russian President Vladimir Putin casts as a declaration of economic war. The moves followed Russia’s invasion of Ukraine in February and it comes as the [European Union considered](https://www.financedigest.com/explainer-why-malaysia-is-considering-a-ban-on-palm-oil-exports-to-the-european-union.html "Explainer-Why Malaysia is considering a ban on palm oil exports to the European Union") an embargo of Russian crude.

COMMENTS:

KAUSHAL RAMESH, SENIOR ANALYST AT CONSULTANCY RYSTAD ENERGY:

(The sanctions) will hasten Europe’s scramble to arrange for additional LNG, [speed up plans](https://www.financedigest.com/vw-to-speed-up-electric-shift-in-five-year-plan.html "VW to speed up electric shift in five-year plan") for a buyers’ alliance and potentially consider demand side measures such as gas rationing.

Storage levels are currently sufficient to last through most of 2022, even if Russian flows were to stop instantly, barring any unexpected weather events – but the outlook for [winter 2022 supply](https://www.financedigest.com/ceraweek-europe-gas-supplies-to-stay-tight-2-more-winters-equinor-ceo-says.html "CERAWEEK-Europe gas supplies to stay tight 2 more winters, Equinor CEO says") is now a lot more pessimistic.

JAMIE WEBSTER, FELLOW AT COLUMBIA UNIVERSITY’S CENTER ON [GLOBAL ENERGY POLICY:](https://www.financedigest.com/impact-com-announces-new-global-parental-leave-policy.html "impact.com announces new global parental leave policy")

The (sanctions) make sense as Europe figures out if it’s going to stop taking crude and products from Russia, which [hits Russia](https://www.financedigest.com/barclays-warns-of-sub-parity-euro-5-ppt-gdp-hit-if-russia-turns-off-gas-taps.html "Barclays warns of sub-parity euro, 5 ppt GDP hit if Russia turns off gas taps") from a revenue standpoint. With gas, it is [painful for Europe](https://www.financedigest.com/analysis-rate-rises-pile-pain-on-sme-firms-in-u-s-and-europe.html "Analysis-Rate rises pile pain on SME firms in U.S. and Europe"). Effectively, they’re each picking what is going to cause the most [economic pain](https://www.financedigest.com/analysis-russians-feel-little-economic-pain-now-long-term-outlook-darkens.html "Analysis: Russians feel little economic pain now, long-term outlook darkens") on the other, but the least economic pain on themselves.

“The big issue is going to be, as we move into the northern winter, how the economies are going to cope with this because it is difficult to find those additional molecules of natural gas.”

ANDREW LIPOW, PRESIDENT OF LIPOW OIL ASSOCIATES IN HOUSTON

“This is a tit-for-tat reaction from Russia. I believe that the Europeans will come up with some workarounds, establishing new entities or subsidiaries that are not on the sanctions list. But this shows that the [energy divorce between Europe](https://www.financedigest.com/europes-energy-crisis-and-the-nuclear-path-out.html "Europe’s energy crisis and the nuclear path out") and Russia is becoming more bitter.

JOHN KILDUFF, A PARTNER AT AGAIN CAPITAL LLC IN NEW YORK:

“It’s obviously what we’ve been going through. It’s another step forward toward curtailing the [supply of natural gas and hydrocarbons out of Russia](https://www.financedigest.com/exclusive-kazakh-mcdonalds-shut-outlets-temporarily-after-halting-supplies-from-russia-sources.html "Exclusive-Kazakh McDonald’s shut outlets temporarily after halting supplies from Russia – sources") to the west. This is a sea change for our [natural gas market becoming a more global](https://www.financedigest.com/u-n-summit-aims-for-global-pact-to-protect-nature.html "U.N. summit aims for global pact to protect nature") reflection of what’s going on in the world.

“All these energy commodities are inter-related. The path of least resistance is [higher as more supplies](https://www.financedigest.com/daimler-truck-sees-higher-returns-as-supply-chains-demand-improve.html "Daimler Truck sees higher returns as supply chains, demand improve") get foreclosed. If there’s regime change in Russia, the whole dynamic will change. This isn’t a policy failure to me. The west has lost a major supplier of crude, refined products and [increasingly natural gas](https://www.financedigest.com/demand-for-automotive-gas-charged-shock-absorbers-market-to-be-fuelled-by-rapid-shift-in-consumer-perception-and-increasing-awareness.html "Demand for Automotive Gas Charged Shock Absorbers Market to be Fuelled by Rapid Shift in Consumer Perception and Increasing Awareness"). Until that changes, it’s a problem but it has a fix to it, if Russia were to [return to the market.”](https://www.financedigest.com/swiss-bank-ubp-returns-to-chinese-markets.html "Swiss bank UBP returns to Chinese markets")

TIM HARCOURT, CHIEF ECONOMIST AT THE INSTITUTE FOR PUBLIC POLICY AND GOVERNANCE AT THE UNIVERSITY OF TECHNOLOGY, SYDNEY, AUSTRALIA:

“This is a counter claim. Tit for tat. So [European 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") traders can’t easily trade with Russia or each other. But ultimately you want to be part of the [world trading](https://www.financedigest.com/anglo-gulf-trade-bank-partners-with-publicis-sapient-and-microsoft-to-launch-worlds-first-end-to-end-digital-trade-finance-bank.html "Anglo-Gulf Trade Bank partners with Publicis Sapient and Microsoft to launch world’s first end to end digital trade finance bank") system rather than just (with) Russia. So it will be ineffectual ultimately.”

RAMANAN KRISHNAMOORTI, [CHIEF ENERGY OFFICER](https://www.financedigest.com/host-analytics-appoints-chris-labruna-as-chief-revenue-officer.html "Host Analytics Appoints Chris LaBruna as Chief Revenue Officer"), UNIVERSITY OF HOUSTON:

The gas sanctions imposed by Russia in the short term are symbolic and likely to [keep pressure on LNG prices](https://www.financedigest.com/analysis-colgate-tide-maker-pg-rejig-price-tactics-to-keep-cash-strapped-shoppers.html "Analysis: Colgate, Tide maker P&G rejig price tactics to keep cash-strapped shoppers") in Europe as well as the pressure to restart of some coal- and nuclear-based electricity in Europe. In real terms, probably not a lot of implications in the short term for Europe or globally unless we [hit an extraordinary heat wave](https://www.financedigest.com/cash-loving-germans-fret-over-exploding-atms-as-cross-border-crime-wave-hits.html "Cash-loving Germans fret over exploding ATMs as cross-border crime wave hits").

However, the challenge is going to be in late fall and [winter in Europe](https://www.financedigest.com/europe-experienced-second-warmest-winter-on-record.html "Europe experienced second-warmest winter on record"). There is no way [Europe is going to have enough ability to bring gas supplies](https://www.financedigest.com/germanys-uniper-to-restart-coal-fired-power-plant-as-gazprom-halts-supply-to-europe.html "Germany’s Uniper to restart coal-fired power plant as Gazprom halts supply to Europe") or alternates to replace the gas demand in winter. That is likely to cause slowing down of industrial production and with the [continued pressure](https://www.financedigest.com/different-employee-engagement-outcomes-for-u-s-and-canadian-companies-amidst-continued-economic-growth-pressures.html "DIFFERENT EMPLOYEE ENGAGEMENT OUTCOMES FOR U.S. AND CANADIAN COMPANIES AMIDST CONTINUED ECONOMIC GROWTH Pressures") on the economy, likely to send Europe into a recession. [Global LNG trades and the pressures on natural gas supply](https://www.financedigest.com/oil-prices-steady-on-uncertain-global-outlook-and-supply-concerns.html "Oil prices steady on uncertain global outlook and supply concerns") in the U.S. are going to be strained.

For Russia on the other hand, the intent is clear – just reciprocating the actions by Western Europe and they get to control the [revenue and gas flows](https://www.financedigest.com/covid-19-cash-flow-and-revenue.html "Covid-19 – Cash Flow and Revenue"). It also causes a clear re-pivot of their [exports to China](https://www.financedigest.com/swiss-gold-exports-to-china-slow-but-shipments-to-turkey-surge.html "Swiss gold exports to China slow but shipments to Turkey surge") – mostly by pipeline.

The short term [impacts on the economy](https://www.financedigest.com/hurricane-matthew-causes-up-to-15bn-impact-to-us-and-caribbean-economies-in-october-according-to-aon-catastrophe-report.html "Hurricane Matthew causes up to bn impact to US and Caribbean economies in October, according to Aon catastrophe report") are likely to be small. Longer-term and considering the winter, this might be the lifeline to [build back the economy](https://www.financedigest.com/meet-tilak-joshi-the-fintech-ceo-building-modern-solutions-for-the-gig-economy.html "Meet Tilak Joshi: the fintech CEO building modern solutions for the gig economy") and the income stream from oil and gas. Lastly for China, this is a huge opportunity to get low-cost natural gas that does not have any competition for uptake and something that they can use to bolster and [grow their manufacturing industry and economy.”](https://www.financedigest.com/german-economy-expected-to-grow-modestly-in-2023-european-commission.html "German economy expected to grow modestly in 2023 – European Commission")

PHIL FLYNN, AN ANALYST AT PRICE FUTURES GROUP IN CHICAGO:

It’s a reminder that Russia still [holds all the cards when it comes to energy](https://www.financedigest.com/energy-utilities-sector-to-hold-60-share-in-switchgear-monitoring-system-market-by-2031.html "Energy & Utilities Sector To Hold 60% Share In Switchgear Monitoring System Market By 2031") security. They’re sanctioning pipelines of people that [put sanctions on Russia](https://www.financedigest.com/russia-puts-iranian-satellite-into-orbit.html "Russia puts Iranian satellite into orbit") and making it more difficult. It’s another threat and another warning and the message is clear: it might be these guys today, but it might be you tomorrow.

“It’s another supportive factor for natural gas, both domestically and foreign. The threat to supply, [every time](https://www.financedigest.com/de-montfort-place-ticks-every-box-for-first-time-buyers-in-bedford.html "De Montfort Place Ticks Every Box For First Time Buyers In Bedford") you think it calms down, it comes back again. The threat level is high. If there’s any weather events, there could be a real problem.”

(Reporting By U.S. Energy Desk)


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