Over the weekend, we commented that in response to Europe’s latest, and most serious, sanction round which would finally impact Russian energy giants Rosenft, Gazprom Neft (but not Gazprom) and Transneft, “suddenly the stakes for Russia, and thus Europe, just got all too real, as Putin will now have no choice but to really ramp up the retaliatory escalation, which following the food ban can only mean one thing: a staggered reduction in gas flow to Europe.“
And while Europe appears to have blown its load prematurely, with the sanctions leaked before Europe actually has the consensus to implement them (it is now a daily threat by Europe which is screaming that it will impose the sanctions any minuteyet not actually doing so), Russia has no such moral quandaries and three days following our forecast, here comes Gazprom confirming once again that it is perfectly happy to play the “mutual defection” strategy in the ongoing and ever escalating game theory between Europe and Russia for one simple reason: it has all the leverage.
RUSSIA LIMITING EU GAS TO RESTRICT REVERSE SUPPLY TO UKRAINE In other words, this is only the beginning as Ukraine has clearly made the case that it will plug its gas reserve gap using “reverese flow” of Russian gas in transit to Europe. More importantly, this follows news earlier today from Poland’s PGNiG which said Gazprom lowered supply by 20%-24% in past 2 days.
This post was published at Zero Hedge on 09/10/2014.