Naftogaz accuses Russia of using gas as a geopolitical weapon

LONDON – Ukraine’s state energy giant Naftogaz’s CEO has accused Russia’s Gazprom of using natural gas as a geopolitical weapon and has urged the US and Germany to crack down on Moscow while awaiting regulatory approval for a controversial pipeline project.

It comes shortly after the International Energy Agency, the world’s energy watchdog, stepped in to urge Russia to send more gas to Europe to ease the region’s deepening supply crisis.

The IEA’s statement on Tuesday was seen as a rare reprimand from the Kremlin and supported the view that Moscow played a role in the European energy crisis – alongside market drivers such as extremely high commodity prices and low wind power.

European households face a steep spike in energy bills, with nerves growing before winter as electricity and gas prices soar.

In a video call with CNBC, Naftogaz CEO Yuriy Vitrenko said that Russian state-run energy giant Gazprom was manipulating the region’s energy crisis to try to bolster the case for electricity to flow through Nord Stream 2.

Gazprom did not respond to a CNBC request for comment.

The pipeline is intended to deliver Russian gas directly to Germany via the Baltic Sea, bypassing Ukraine and Poland.

Critics argue that the pipeline is incompatible with European climate targets, increases the region’s dependence on Russian energy exports and will most likely strengthen the economic and political influence of Russian President Vladimir Putin on the region.

Construction of Nord Stream 2 was completed earlier this month. The German energy regulatory authority has meanwhile announced that, after receiving all the necessary documents for an operating license, it now has four months to complete the certification of the project.

Naftogaz’s Vitrenko said Gazprom had deliberately withheld gas supplies to Europe, blocked access to Ukraine’s gas transport system for other Russian companies and exports from Central Asia that could enter Ukraine via Russia.

“This is a very clear sign that they are currently using gas as a geopolitical weapon,” Vitrenko said.

Kiev’s relations with Russia collapsed in 2014 after Moscow annexed the Crimean peninsula from Ukraine and supported pro-Russian separatists in Ukraine’s eastern Donbass region. According to Ukraine, more than 14,000 people were killed in the seven-year conflict.

European benchmark gas prices have soared more than 250% since January, while benchmark electricity contracts in France and Germany have doubled.

This week, EU energy ministers met in Slovenia to discuss the bloc’s energy policy.

Outgoing German Chancellor Angela Merkel attempted to allay long-standing concerns about the Nord Stream 2 pipeline on her last visit to Kiev before resigning.

Last month, Merkel, along with Ukrainian President Volodymyr Selenskyj, said that sanctions could be imposed on Moscow if gas is used “as a weapon”.

Analysts asked how Germany or Europe would determine this.

When asked whether Naftogaz believed that Germany would take appropriate action if Russia’s Gazprom used gas as a geopolitical weapon, Vitrenko replied: “We are already seeing Gazprom using gas as a geopolitical weapon. So it’s not about the future.” but we tell them that Gazprom has been using gas as a geopolitical weapon for years. “

“It’s happening right now … record prices that are really hurting Ukraine’s economy [and] not just Ukraine, basically the whole region. If it’s not an economic war, what is it? “

The Federal Ministry for Economic Affairs and Energy declined to comment when contacted by CNBC.

Naftogaz’s chief executive officer said he expected President Joe Biden’s government to immediately reconsider its decision to lift sanctions against Nord Stream 2 AG, the Swiss-registered Gazprom company working on the Nord Stream 2 pipeline .

Delaying the waiver any further would make such a decision “increasingly difficult,” Vitrenko said.

The Biden government concluded in May that Nord Stream 2 AG and its CEO had committed behavior that justified sanctions. However, Biden waived the sanctions in order to give time to work out a deal and further develop relations with Germany.

The Senate Foreign Relations Committee is expected to hold a closed hearing next week on the matter. It comes amid mounting pressure from some members of Congress to abandon the waiver and impose sanctions.

“First you show that you are compliant and only then can you operate in principle. This is how it works,” said Vitrenko.

“We expect the US government to reconsider its decision and lift this exemption and impose sanctions on Nord Stream 2 so that they now comply with European rules, then these sanctions will be lifted. That is the logical approach. “

“If someone violates, someone uses gas as a geopolitical weapon, you sanction that someone. And if they behave, you lift those sanctions,” said Vitrenko.