Bloomberg: Europe’s fragile energy market prepares for Putin’s next move

Europe may be heading for a sudden shutdown of Russian gas, a scenario that would trigger energy bills, higher inflation and a deep recession.

Controversy over payment terms has already led Moscow to close its cannons to Poland and Bulgaria. With supply already limited, they will not need much more to shock energy markets.

Europe’s gas balance is “fragile and only one supply disruption remains far from complete collapse,” said Shikha Chaturvedi, an analyst at JPMorgan Chase & Co.

If the procedures cannot be resolved to meet the Kremlin’s demands and at the same time avoid EU sanctions, most countries risk being excluded in the coming days or weeks.

Europe relies on Russian gas for one-fifth of its electricity production, and a small shutdown could quickly spread across the continent. Storage levels are currently at only 32% of capacity, compared to the target of at least 80% required to keep homes warm and factories in operation during the winter.

The closure of Poland and Bulgaria shows the pressure. While quantities are relatively low, shortages have absorbed supplies from Germany and liquefied natural gas shipments. This lowers the cushion for further disturbances.

President Vladimir Putin has ordered gas customers in Europe to pay in rubles, something the EU says violates sanctions, and has urged companies to continue paying in euros – leaving the Kremlin to decide whether to refuse or accept . As the bloc aims to reduce its dependence on Russian gas by two-thirds this year, a sharp shutdown would come very soon.

The EU has offered vague guidelines in an effort to counter Russia for its invasion of Ukraine, while maintaining gas flows. On Friday, Russia clarified the rules on how European customers should pay, easing the terms slightly but still leaving doubts about the role of the sanctioned central bank in converting the euro into rubles.