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Russian energy giant Gazprom has decided to cease gas deliveries to Dutch gas trader GasTerra following its refusal to pay for gas in rubles.

Effective immediately, GasTerra will not receive approximately two billion cubic metres of gas from Russia as per the contract between the two parties, which was scheduled to end on 1 October 2022.

In a press statement, GasTerra said: “The European gas market is highly integrated and extensive. However, it is impossible to predict how the lost supply of two billion cubic metres of Russian gas will affect the supply/demand situation and whether the European market can absorb this loss of supply without serious consequences.

“GasTerra has repeatedly urged Gazprom to respect the contractually agreed payment structure and supply obligations, but to no avail.”

GasTerra trades gas on behalf of the Dutch Government and plans to replace Russian gas from other gas providers.

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By GlobalData

The Dutch government owns a 50% stake in GasTerra while Shell and Exxon each own 25%.

Gazprom was cited by Reuters as saying in a statement that it will cut gas supplies to GasTerra until the latter settles gas payments in line with Russia’s proposed scheme.

In March 2022, Russian President Putin issued a decree mandating foreign companies to open accounts with Gazprombank in Moscow and make payments for Russian gas in rubles.

GasTerra said its decision not to comply with Gazprom’s payment demands will enable it to avoid the risk of breaching the EU’s sanctions.

The Dutch firm said there are also several operational and financial risks associated with the payment route as required by Gazprom.

GasTerra added: “In particular, opening accounts in Moscow under Russian law and their control by the Russian regime pose too great a risk for the Groningen company.”

Danish energy company Orsted has also warned that Gazprom Export might also cease supplying gas as it too has refused to pay in rubles.

In a press statement, Orsted said: “We have no legal obligation under the contract to do so, and we have repeatedly informed Gazprom Export that we will not do so. The payment deadline is 31 May and Ørsted will continue to pay in Euros.

“Therefore, there is a risk that Gazprom Export will stop supplying gas to Ørsted. In Ørsted’s view, this will be a breach of contract.”