Russia Threatens to Cut Natural Gas Flows to Europe Via Nord Stream 1

(Bloomberg) — Russia threatened to cut natural gas supplies to Europe via the Nord Stream 1 pipeline as part of its response to sanctions imposed over the invasion of Ukraine, a move that could heighten the turmoil in energy markets and drive consumer prices even higher.

Russia has the right to take actions that “mirror” the penalties imposed on the Russian economy, Deputy Prime Minister Alexander Novak — who’s also in charge of energy affairs — said in a televised speech late Monday. He said no decision to shut off Nord Stream 1 has yet been taken, and the pipeline is currently operating “at its full capacity.”

The comments come after a day of wild swings on European gas markets, with prices at one point surging by almost 80% amid fear of disruption to supplies from Russia.

Europe’s reliance on Russian energy has been a key factor in efforts by the continent’s leaders to agree on how to respond to the invasion of Ukraine. Last month, Berlin shelved the $11 billion Nord Stream 2 pipeline project, and European Union officials say they’re working on a plan that could cut the bloc’s import needs from Russia by almost 80% this year.

But many EU politicians remain wary of immediate action, one reason why Germany has pushed back against proposals for a ban on oil imports. German Chancellor Olaf Scholz said Monday that Russian oil and gas are of “essential importance” to the European economy. Roughly 40% of EU gas imports and one quarter of its oil come from Russia.

Novak said that Russia has other options for selling its oil if the U.S. and EU ban Russian imports, and he warned that any such move could have “catastrophic consequences for the world market” with prices surging to $300 a barrel or more.