Finland Loses Main Gas Supply After Refusing Payment in Rubles

(Bloomberg) -- Finland is becoming the third European country to be cut off from Russian natural gas after refusing to pay for the fuel in rubles. 

Flows on a main pipeline from the region’s top supplier are set to stop in the early hours of Saturday, according to a filing by Finnish importer Gasum Oy. Poland and Bulgaria had their taps turned off last month for the same reason. 

The lost supplies will likely have a limited impact on the Nordic nation’s economy, with the fuel accounting for just about 5% of the energy mix. It’s mainly used by factories rather than for heating like in many other European nations. 

“Gazprom Export informed Gasum that natural gas supplies to Finland under Gasum’s supply contract will be cut on Saturday,” the Finnish company said. “Gasum will supply natural gas to its customers from other sources through the Balticconnector pipeline.”

The halt also comes a week after electricity sales into Finland from Russia ended, coinciding with a decision to seek entry into the NATO defense alliance together with Sweden. Russia has said an entry will have consequences, without providing details. 

European nations are split over how to handle Moscow’s demand from late March that all payments for the fuel should be made in rubles, and utilities have responded to the challenge differently. Russia said on Thursday that about half of Gazprom PJSC’s foreign clients have complied with the request and opened ruble accounts, without naming any companies. 

In the meantime, supplies continue to flow into Finland via the Balticconnector pipeline from Estonia, but its capacity may not be enough to meet demand. That’s after a number of companies have already switched to other fuels or secured alternative supplies. For the coming winter, the government on Friday agreed on renting a floating LNG terminal together with Estonia.

The pipeline from Russia has recently accounted for about 66% to 75% of Finland’s supplies.

The supply cut by Russia is slated to kick off market steering measures by the grid operator, meaning it may ration flows to users. Finland also has reserve fuel in storage, which can be fed into the network if pressure otherwise drops too low. Reduced supply is likely to further raise the price of the fuel.

The biggest users are Neste Oyj, which uses the fuel to make hydrogen needed for its oil refining operations, forestry companies and steel mills.

(Updates with context from fifth paragraph.)

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