Nicholas Richardson
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Pipeline

“Thou knowest, winter tames man, woman, and beast.” So wrote Shakespeare. And as the summer recedes is General Winter, hitherto Russia’s great defender (if you happened to be Bonaparte or Hitler) preparing to go on the attack to tame those countries which have the temerity to criticise brother Putin’s Ukraine adventure?

Poland’s deputy prime minister, Janusz Piechocinski, seems to think so, saying that last week’s disruption to Poland’s gas supply from Russia is an attempt to test Warsaw’s resolve in the conflict with Moscow over the Ukraine crisis. “I think that the temporary disruptions of the recent days were in fact an attempt from the eastern supplier to test Poland’s reaction,” he said on Saturday after Poland’s gas distributor reported a cut in the volume of gas being delivered to Poland. The Polish gas pipeline operator Gaz-System reported that deliveries were less than requested. Last Monday, supplies were some 20 percent lower than orders, on Tuesday they were 24 percent lower and on Wednesday they were 45 percent lower. On Thursday the volume was higher, but still below the volumes ordered.

Needless to say the Russian gas company Gazprom had a different view saying that it will be able to supply Poland with a minimum level of gas. “They are requesting the maximum, and we are only able to supply closer to the daily minimum,” a Gazprom spokesperson told Reuters on Saturday, without saying more. Last week Gazprom had said that it was in the process of filling Russia’s gas caverns and that exports were to some point dependent on that operation.

But does that mean that mean something untoward is afoot? Not necessarily. Without seeing the gas supply agreement (which is, not unnaturally, not publicly available) and having access to the meters at the measuring stations on the border it is hard to say. We do know that Russia supplies Poland on the basis of a long term “take or pay” agreement. Such agreements (assuming this one follows a standard pattern) typically provide that the buyer must accept delivery and pay for the agreed minimum volumes of gas during the contract term. If it chooses, the buyer may decline to take that volume of gas on any given day in which case it must still pay for the agreed volume and has a limited opportunity to take at a later date the gas paid for but not actually taken. Similarly, the buyer may request additional volumes of gas on any given day up to an agreed maximum but the seller is not obliged to supply these additional volumes if they are not available. The Seller typically may also reduce volumes for other reasons, such as plant maintenance, but this is normally in accordance with a schedule agreed in advance.

Looking at what was actually said by both sides it appears that this may have been a storm in a pipeline. On the one hand Gaz-System’s spokeswoman said on Sunday that the increased (emphasis mine) requests by Polish gas distribution PGNiG were not being met and, on the other, Gazprom said that it was delivering the usual volume of gas to Poland, 23 million cubic metres a day. Interestingly, lower than expected supplies were also reported in Slovakia so it is not beyond the bounds of possibility that Russia is seeking to discourage the EU from imposing further sanctions related to the Ukrainian crisis and also to dissuade Poland, Slovakia and Hungary from continuing the reverse supply of Russian gas to Ukraine. However, PGNiG said that individual gas consumers will not be affected and that Poland’s gas stores were full.

Be that as it may, we shouldn’t forget General Winter because the Russians clearly haven’t. The challenge, as ever with Putin, is to demonstrate collective will so that we are as effective at getting our way as he is his. Otherwise, as Shakespeare also wrote “this cold night will turn us all to fools and madmen.”

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