Russia’s Gazprom says gas flows to Europe will stay shut after G7 agreed price cap to choke Putin’s war machine

World

Russia’s Gazprom has said natural gas supplies to Europe via the Nord Stream 1 pipeline will remain shut off.

It comes after G7 finance ministers agreed to impose a price cap on Russian oil exports in an effort to limit funding for President Vladimir Putin’s war in Ukraine.

Gazprom said it was not reinstating supplies to Europe because the main gas turbine at Portovaya compressor station near St Petersburg could not operate safely until a leak was repaired. It did not say when supplies would be restarted.

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Moscow has blamed sanctions imposed by the West after Russia invaded Ukraine for hampering routine operations and maintenance for Nord Stream 1. However, Brussels has said that is a pretext and Russia is using gas as an economic weapon to retaliate.

Germany’s network regulator said the country was better prepared for a stop of Russian gas supplies, but urged citizens and companies to cut consumption.

“In view of the Russian decision not to allow any gas to flow via Nord Stream 1 for the time being, the LNG terminals,
the relevant storage levels & significant savings requirements are becoming more important,” Klaus Mueller, president of the Bundesnetzagentur, tweeted. “It’s good that Germany is now better prepared, but now it’s down to each and everyone.”

More on Russia

The Nord Stream 1 gas leak Gazprom says is in one of the engines at at Portovaya compressor station. Pic: Gazprom
Image:
The Nord Stream 1 gas leak Gazprom says is in one of the engines at at Portovaya compressor station. Pic: Gazprom

The G7 decision was made at a virtual meeting of the group, made up of seven of the world’s richest countries – the UK, US, Canada, Italy, France, Germany and Japan – on Friday afternoon.

Confirming the news, Chancellor Nadhim Zahawi said: “We will curtail Putin’s capacity to fund his war from oil exports by banning services, such as insurance and the provision of finance, to vessels carrying Russian oil above an agreed price cap.”

The price cap has not yet been decided.

Nadhim Zahawi energy cap
Image:
Chancellor Nadhim Zahawi

A statement from the G7 finance ministers said it would be set by the full coalition before it is implemented in each country.

Despite selling less oil since the invasion of Ukraine in February, Russia made £600m more from oil sales in June than it did in the previous month because of rocketing prices pushed up by the war.

As well as limiting Russia’s revenues, it is hoped the price cap can also bring down rising energy prices around the world.

Speaking after the announcement, Mr Zahawi said the move will “protect our citizens from oil price shocks next year”.

He added: “That is a significant step forward.

“It will mean that Putin can’t profiteer from excessively high oil prices and of course, protect all of us from oil price shocks next year and beyond.”

‘Putin’s strategy will not work’

The G7 decision comes after Mr Zahawi met with Treasury Secretary Janet Yellen in Washington on Wednesday for talks on how to tackle the spiralling cost of living crisis.

Sky News understands that the meeting was important in getting the two countries in lockstep over the price cap.

Mr Zahawi said G7 ministers would be discussing strategies to implement the cap in December, then putting it in place in February.

Energy bills will soar for millions of UK households before then, after Ofgem hiked up its October price cap by 80% – plunging many into financial hardship.

A heroic wish list that remains very short on detail


Paul Kelso - Health correspondent

Paul Kelso

Business correspondent

@pkelso

G7 and EU nations have already vowed to reduce or cut imports of Russian oil and gas.

The “price cap” announced by G7 finance ministers today is an attempt to further choke Moscow’s fossil fuel revenue, by targeting the service companies that provide the logistical and administrative architecture of the oil trade.

The G7 says services providers will be prohibited from “enabling maritime transport” of crude oil and petroleum products if they’re traded above a yet-to-be-determined cap.

The communique is not specific about which services, but we can assume shipping, transport, insurance, finance and trading companies, many of which are based in the EU, US, UK and Switzerland, are in the finance ministers’ sights.

The aim, according to Chancellor Nadhim Zahawi, is to cut Moscow’s oil revenues while also protecting low and middle-income countries still reliant on Russian imports, and to insulate British consumers from future price shocks.

That’s a heroic wish list but one that remains theoretical and very short on detail. This communique signals only an “intention to finalise and implement” a plan and it is unclear how it would be enforced.

What is clear is that existing measures to curb fossil fuel reliance are not hitting the Kremlin revenues as hard as hoped.

Even as Russian oil export volumes have fallen, higher global prices triggered by the war mean revenues are rising. Research by the Centre for Energy and Clean Air suggests revenue rose in July as exports fell 6%.

And while Western customers are turning their backs, India and China are picking up the slack, with Beijing now relying on Moscow for almost 25% of oil imports.

The G7’s move today is an acknowledgement that so far, Russia’s strategic weaponising of fossil fuels has been a strategic win-win.

While European consumers are hit with higher bills, in turn perhaps weakening support for Ukraine, Moscow is still cashing in.

Read more:
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Mr Zahawi acknowledged people need help sooner than when the cap on Russian oil comes in to effect.

He said he was “very concerned of the scarring effect on businesses” and that the government is “working up options” so the next prime minister, who will be named on Monday, can “hit the ground running to be able to offer additional help in January and through to next year.”

Mr Zahawi added: “Putin has to know that this strategy is not going to work. He thinks that actually using energy as a tool to get back at us will work… It’s not going to work.

“And actually, today’s G7 is another reminder to him why we’re going to coordinate and we’re going to deal with these energy price shocks collectively and will continue to help Ukraine reclaim their country.”

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