Russian Gazprom informed Polish and Bulgarian natural gas companies that supply of Russian gas has been halted this morning and will not resume unless Poland and Bulgaria agreed to pay for gas in Russian rubles. This means that the sanctions grand finale may have arrived. As Russia decided to cut Europe off its gas before Europe imposed embargo. While it is uncertain what comes next, it is certain that the whole discussion on the Russian natural gas embargo will gather pace now.
Neither Poland, nor Bulgaria plan to make payments in roubles but reaction of other European countries may be different. Media reports (unconfirmed yet) claim that Austria has backed down and agreed to pay for Russian gas in roubles. Meanwhile, Greece has called an emergency meeting on the situation. So far, Russia has halted supplies to relatively small European countries, meant likely at sending a message to bigger countries, like Germany. Germany’s opposition to imposing an oil embargo is weakening but natural gas is a different story.
While the sudden halt of Russian gas exports to Europe will be a blow for the European economy, it will also be a blow to Russia. Russia simply cannot replace exports to the EU with exports to other customers due to inadequate infrastructure. As the situation benefits no one, the question is who blinks first.
The situation is putting upward pressure mostly on European gas prices, investors should also follow US prices (NATGAS). European countries are boosting purchases of US LNG in order to prepare for the possibility of total Russian natural gas supply halt. While gains of the US gas benchmark were limited so far, the line of least resistance leads higher. Taking a look at the NATGAS chart at D1 interval, we can see that recent correction was halted near the 2021 highs and upward move was resumed today. The nearest resistance to watch is marked with 161.8% exterior retracement of a downward move that occurred in the second half of 2021.