Russia says gas will stay cut until payments made in rubles

Russia’s Gazprom PJSC said it has halted gas flows to Poland and Bulgaria and will keep the supplies turned off until the two countries agree to Moscow’s demand to pay for the crucial fuel in rubles.

European gas prices surged more than 20% on Wednesday as traders digested the sudden move and calculated which countries will be hit next.

Moscow is making good on a threat to halt gas flows to countries that refuse President Vladimir Putin’s new demand to pay for the fuel in rubles.

The European Union has rejected the move in principle but now payment deadlines are starting to fall due, governments across Europe need to decide whether to accept Putin’s terms or lose crucial supplies — and face the prospect of energy rationing.

There’s been no comment from major European capitals yet. The bloc had appeared to indicate last week a possible compromise solution that would allow the gas to keep flowing. But the move against EU members Poland and Bulgaria probably makes a fix harder to achieve.  Germany is massively dependent on Russian gas and has raised the prospect of rationing fuel to its giant economy if flows are cut. 

Gazprom also warned Poland and Bulgaria — which are both transit countries for Russian gas --- that if they syphon off gas that’s meant for other destinations then the company will reduce transit flows.

This is the first cut-off to Europe since disputes on gas prices between Russia and Ukraine in 2006 and 2009 led to disruptions in onward supplies to European nations. The second disruption, in the freezing winter of 2009, lasted almost two weeks and halted all gas transit to the EU via Ukraine, leading to a scramble for supply. Slovakia and some Balkan countries had to ration gas, shut factories and cut power supplies.

Benchmark Dutch futures soared as much as 24% to 127.50 euros per megawatt-hour, the highest level since April 1. 

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