HS: Finland preparing for possible suspension of gas deliveries from Russia

A gas pipe outside the headquarters of Nokian Tyres in Nokia, Pirkanmaa, on 29 March 2022. (Jussi Nukari – Lehtikuva)

FINNISH companies and the central administration are preparing for the eventuality that the flow of natural gas from Russia dries up in May, reports Helsingin Sanomat.

With both Finland and the European Union declaring they will not comply with the new payment terms imposed at the beginning of last month on gas supplies by Russia, the risk of deliveries being suspended is regarded as real.

Gazprom, the Russian state-owned natural gas producer, has announced that compliance with the terms is a prerequisite for the continuation of gas deliveries, citing such non-compliance as grounds for its recent decision to halt deliveries to Bulgaria and Poland. Gasum, the Finnish state-owned natural gas importer and distributor, has been asked to issue a response to the payment terms by 20 May, according to information obtained by Helsingin Sanomat.

The same deadline is believed to have been given to buyers in many other member states.

The Finnish gas infrastructure – that is, liquefied natural gas terminals and the Baltic Connector pipeline between Finland and Estonia – will not suffice in the event of a suspension to the flow of Russian natural gas in Imatra, South Karelia.

Finland and Estonia have also launched a joint undertaking to procure a terminal ship, but the terminal is expected to be in use at the earliest next winter.

Even though natural gas has a considerably smaller role in Finland than in Eastern and Central Europe, industry in particular may have to look for alternative suppliers or reduce production in the event that gas deliveries are suspended, given that it accounts for roughly two-thirds of natural gas consumption in Finland.

Natural gas accounted for roughly five per cent of total energy consumption in Finland in 2021. Industries, though, use gas primarily as a raw material rather than an energy source.

Households that use gas for heating will be guaranteed access to gas with special measures, if necessary.

Some companies have already taken action to prepare for the drying up of gas deliveries. Neste, one of the largest natural gas consumers in Finland, has tested propane as an alternative to gas at its refinery in Porvoo. The tests have progressed promisingly well, according to CEO Peter Vanacker.

“We’re increasingly confident that we’ll be able to manage the risk [of gas deliveries ending],” he said to Helsingin Sanomat on Friday.

Gazprom has demanded that gas buyers set up two accounts with its financial arm, Gazprombank – one in euros or another foreign currency and the other in roubles. While the buyers are able under the terms make their payments as usual in a foreign currency, the payment would not be regarded as completed until the bank has converted the payment into roubles and transferred it to the rouble-denominated account.

The European Commission believes the arrangement is problematic for two reasons.

Prior to being converted into roubles, the payments would constitute a loan of sorts to the Central Bank of Russian Federation. This would be in violation of the ban on transactions with the central bank imposed by the 27-country bloc. As no deadline has been set for the currency conversion, the central bank would theoretically be able to hold on to the payment indefinitely.

The problem could be tackled by ruling that the payments have been completed as soon as the euro-denominated payment has been made, according to the European Commission.

Aleksi Teivainen – HT