Russia halts gas to Poland, Bulgaria, taking aim at European economies

By Marek Strzelecki, Tsvetelia Tsolova and Pavel Polityuk

WARSAW/SOFIA/KYIV (Reuters) -Russia halted gas supplies to Bulgaria and Poland on Wednesday for rejecting its demand to pay in roubles, taking direct aim at European economies in its toughest retaliation so far against international sanctions over the war in Ukraine.

The step was denounced by European leaders as "blackmail", and comes as European countries have joined the United States in ramping up arms shipments to help Ukraine fend off a new Russian assault in the east. Kyiv reported on Wednesday that Russian troops had made gains in several villages there.

Moscow says the gas cut-off is to enforce its demand for payment in roubles, needed to shield its economy from sanctions.

Poland confirmed that supplies had been cut, while Bulgaria said it would find out soon. Both accused Gazprom (MCX:GAZP) of breaching longstanding supply contracts.

"Because all trade and legal obligations are being observed, it is clear that at the moment the natural gas is being used more as a political and economic weapon in the current war," Bulgarian Energy Minister Alexander Nikolov said.

Gazprom, the Russian gas export monopoly, said in a statement it had "completely suspended gas supplies to Bulgargaz and PGNiG due to absence of payments in roubles," referring to the Polish and Bulgarian gas companies.

Russian President Vladimir Putin demanded last month that buyers from "unfriendly" countries pay for gas in roubles or be cut off. The European Union says this violates contracts that called for payment in euros.

"The announcement by Gazprom that it is unilaterally stopping delivery of gas to customers in Europe is yet another attempt by Russia to use gas as an instrument of blackmail," European Commission President Ursula von der Leyen said.

"This is unjustified and unacceptable. And it shows once again the unreliability of Russia as a gas supplier," she said.

Poland and Bulgaria are both former Soviet-era satellites of Moscow that have since joined the EU and NATO. Poland has been one of the Kremlin's most vocal opponents over the war. Bulgaria has had warm relations with Russia in the past, but Prime Minister Kirill Petkov, an anti-corruption campaigner who took office last year, strongly denounced Russia's invasion of Ukraine.

Petkov was due to travel on Wednesday to Kyiv, the latest European leader to meet President Volodymyr Zelenskiy.

Poland receives its Russian gas through the Yamal-Europe pipeline from Russia's huge gas fields in the Arctic far north, which continues west to supply Germany and other European countries. Bulgaria is supplied through pipes over Turkey.

Other European countries, including Germany, the biggest buyer of Russian gas, did not report cuts.

Polish state-owned PGNiG confirmed its supplies from Gazprom had been cut but said it was still supplying its own clients as needed.

"Cutting gas supplies is a breach of contract and PGNiG reserves the right to seek compensation and will use all available contractual and legal means to do so," the company said.

Supplies from Gazprom cover about 50% of Poland's consumption and about 90% of Bulgaria's. Poland said it did not need to draw on reserves and its gas storage was 76% full. Bulgaria has said it is in talks to try to import liquefied natural gas through Turkey and Greece.

LOOPHOLE

Russia's energy exports had until now continued largely unhindered since the war began, the biggest loophole in sanctions that have otherwise cut off Moscow from much of its trade with the West.

Kyiv has long called on Europe to stop funding Moscow's war effort by cutting off imports that bring Russia hundreds of millions of dollars a day.

Germany said this week it is hoping to stop importing Russian oil within days. But weaning Europe off cheap and abundant Russian natural gas, which heats its houses, fuels its factories and drives its electric power plants, would be a far more disruptive prospect.

Andriy Yermak, chief of staff to Ukraine's President Volodymyr Zelenskiy, said Russia was "beginning the gas blackmail of Europe".

RUSSIA MAKES GAINS IN EAST

Since the Russian invasion force was driven back at the outskirts of Kyiv last month, Moscow has refocused its operation on eastern Ukraine, starting a new offensive from several directions to fully capture two provinces known as the Donbas.

Ukraine's general staff acknowledged Russia had made gains in the east, capturing the town of Zavody and some outskirts of the town of Velyka Komyshuvakha on one front, and the Zarichne and Novoshtokivske settlements in Donetsk region.

Russia's defence ministry said its missiles had struck an arms depot in Zaporizhzhia region housing Western arms.

Blasts were heard early on Wednesday in three Russian provinces bordering Ukraine, authorities said, and an ammunition depot in the Belgorod province caught fire. The regional governor said the blaze near Staraya Nelidovka village had been put out.

Russia this month accused Ukraine of attacking a fuel depot in Belgorod with helicopters and opening fire on several villages in the province. A fire also broke out this week at a fuel depot in nearby Bryansk. Ukraine does not confirm responsibility for reported incidents on Russian territory.

An aide to the mayor of the port city of Mariupol said Russian forces had renewed their attacks on the Azovstal steel plant, where fighters and some civilians are holed up. No agreements had been reached on trying to evacuate civilians from Mariupol on Wednesday.

Concern has increased in recent days over the prospect of the conflict widening to neighbouring Moldova, where pro-Russian separatists have reported attacks this week in a region occupied since the 1990s by Russian troops.

The separatists reported firing across the border from Ukraine near an arms depot on Wednesday. Moldova's pro-Western government has blamed forces inside the separatist region for attacks aimed at provoking conflict.

The invasion of Ukraine has left thousands dead or injured, reduced towns and cities to rubble, and forced more than 5 million people to flee abroad. Moscow it a "special operation" to disarm Ukraine and defeat fascists.