Russia's Gazprom halts gas supplies to Poland and Bulgaria

© Reuters. FILE PHOTO: The logo of Gazprom company is seen on the facade of a business centre in Saint Petersburg, Russia March 31, 2022. REUTERS/Reuters photographer/File Photo

SOFIA/WARSAW (Reuters) -Russian energy giant Gazprom (MCX:GAZP) on Wednesday halted gas supplies to Bulgaria and Poland for failing to pay for gas in roubles, the Kremlin's toughest response yet to the crippling sanctions imposed by the West for the invasion of Ukraine.

Poland and Bulgaria are the first countries to have their gas cut off by Europe's main supplier since the Feb. 24 invasion of Ukraine that has killed thousands of people, displaced millions more and raised fears of a broader conflict.

"Gazprom has completely suspended gas supplies to Bulgargaz (Bulgaria) and PGNiG (Poland) due to absence of payments in roubles," Gazprom said in a statement.

Gazprom also warned that transit via Poland and Bulgaria - which host pipelines supplying Germany, Hungary and Serbia - would be cut if gas was taken illegally.

Warsaw and Sofia said the halt to supplies was a breach of contract by Gazprom, the world's biggest natural gas company.

Russian President Vladimir Putin has ordered European countries to pay for gas in roubles after what the West froze Russian assets and largely cut Moscow out of the West's economic system over the war in Ukraine.

Putin has demanded that countries he terms "unfriendly" agree to a scheme under which they would open accounts at Gazprombank and make payments for Russian gas imports in euros or dollars that would be converted into roubles.

"Payments for gas supplied from April 1 must be made in roubles using the new payments details, about which the counterparties were informed in a timely manner," Gazprom said.

Poland has repeatedly said it will not pay for Russian gas in roubles and has planned not to extend its gas contract with Gazprom after it expires in the end of this year.

The Yamal-Europe pipeline across Poland supplies Russian gas to Germany, though it has mostly been working in a reverse mode this year, supplying gas eastward from Germany. Bulgaria is a transit country for gas supplies to Serbia and Hungary.

Bulgaria Energy Minister Alexander Nikolov said that the country has paid for Russian gas deliveries for April and halting gas supplies would be a breach of its current contract with Gazprom.

"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," Nikolov said.

The benchmark Dutch front-month gas contract at the TTF hub jumped by more than 19% on the day on Wednesday morning to 117 euros per megawatt hour.