Finland the third nation to lose Russia gas supply

HELSINKI • Russia is cutting Finland off from its natural gas supplies as relations between the two neighbours sour over the Nordic nation's decision to join defence alliance Nato.

Finland is the third European country to lose gas from Russia after refusing to pay for the fuel in roubles. Flows on a main pipeline from the region's top supplier were set to stop in the early hours of today, according to a filing by Finnish importer Gasum Oy.

Poland and Bulgaria had their taps turned off last month for the same reason.

"Most in the market expect Finland to be the only buyer to have deliveries cut at this time," but "the risk remains that buyers elsewhere could also suffer the same fate", said Mr Tom Marzec-Manser, head of gas analytics at ICIS in London, citing a recent poll of traders.

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

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

"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."

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 even after a number of companies have already switched to other fuels or secured alternative supplies.

For the coming winter, the government yesterday agreed to jointly rent a floating liquefied natural gas (LNG) terminal with Estonia.

"The new LNG vessel is a significant step in improving security of energy supply in Finland," Finance Minister Annika Saarikko said yesterday. "This will make it possible to break away from Russian energy. The importance of the project cannot be overemphasised now."

Although it is a relationship dating back five decades, Finland is a relatively small client for Gazprom. Exports to Russia's western neighbour accounted for about 1 per cent of the company's combined sales to Europe and Turkey in the first half of last year.

The halt also comes a week after electricity sales into Finland from Russia ended, coinciding with a decision to seek entry into Nato together with Sweden. Russia has said an application to join will have consequences.

BLOOMBERG