Ukraine’s Naftogaz CEO accuses Russia of using gas as a geopolitical weapon as energy crisis deepens

LONDON — The chief executive of Ukrainian state energy giant Naftogaz has accused Russia’s Gazprom of using natural gas as a geopolitical weapon, calling on the U.S. and Germany to take action against Moscow while it awaits regulatory approval for a controversial pipeline project.

It comes shortly after the International Energy Agency, the world’s energy watchdog, intervened to call on Russia to send more gas to Europe to alleviate the region’s deepening supply crunch.

The IEA’s statement on Tuesday was seen as a rare rebuke of the Kremlin and lent further support to the view that Moscow has played a role in Europe’s energy crisis — alongside market drivers such as extremely strong commodity prices and low wind output.

European households face a steep jump in energy bills, with nerves growing ahead of winter as power and gas prices soar.

Speaking to CNBC via video call, Naftogaz CEO Yuriy Vitrenko said Russia’s state-owned energy giant Gazprom was manipulating the region’s energy crisis to try to strengthen the case for starting flows via Nord Stream 2.

Gazprom did not respond to a CNBC request for comment.

The pipeline is designed to deliver Russian gas directly to Germany via the Baltic Sea, bypassing Ukraine and Poland.

Critics argue the pipeline is not compatible with European climate goals, deepens the region’s dependence on Russian energy exports and will most likely strengthen Russian President Vladimir Putin’s economic and political influence over the region.

The construction of Nord Stream 2 was completed earlier this month. Germany’s energy regulator has since said it now has four months to complete certification of the project after receiving all necessary paperwork for an operating license.

Naftogaz’s Vitrenko said Gazprom was deliberately withholding gas supplies to Europe, blocking access to the gas transmission system of Ukraine from other Russian companies and blocking exports from Central Asia that could go to Ukraine via Russia.

“This is a very clear sign that they are using gas as a geopolitical weapon at the moment,” Vitrenko said.

Kyiv’s relations with Russia plummeted in 2014 after Moscow annexed the Crimea peninsula from Ukraine and supported pro-Russian separatists in Ukraine’s eastern Donbass region. Ukraine says the seven-year conflict has killed more than 14,000 people.

Benchmark European gas prices have skyrocketed more than 250% since January, while benchmark power contracts in France and Germany have both doubled.

EU energy ministers held meetings in Slovenia this week to discuss the bloc’s energy policy.

Outgoing German Chancellor Angela Merkel sought to ease long-running concerns about the Nord Stream 2 pipeline during her final visit to Kyiv before leaving office.

Speaking last month alongside Ukraine President Volodymyr Zelensky, Merkel said sanctions may be imposed against Moscow if gas was being used “as a weapon.”

Analysts have questioned how Germany or Europe would determine that to be the case.

When asked whether Naftogaz had faith Germany would take appropriate action if Russia’s Gazprom was deemed to be using gas as a geopolitical weapon, Vitrenko replied: “We already see that Gazprom is using gas as a geopolitical weapon. So, it is not about the future, but we are telling them that Gazprom has been using gas as a geopolitical weapon for years.”

“It is happening at the moment … Record prices that really hurt the economy of Ukraine [and] not just Ukraine, the whole region basically. If it is not an economic war, what is that?”

Germany’s ministry for economic affairs and energy declined to comment when contacted by CNBC.

Naftogaz’s chief executive said he expects President Joe Biden’s administration to immediately reconsider its decision to waive sanctions on Nord Stream 2 AG, the Gazprom-owned, Swiss-registered company working on the Nord Stream 2 pipeline.

A further delay to lift the waiver would make such a decision “more and more difficult,” Vitrenko said.

Biden’s administration concluded in May that Nord Stream 2 AG and its CEO engaged in behavior that warranted sanctions. However, Biden waived the sanctions to allow time to work out a deal and continue building ties with Germany.

The U.S. Senate Foreign Relations Committee is expected to discuss the matter at a closed-door hearing next week. It comes amid intensifying pressure from some Congress members to drop the waiver and impose sanctions.

“First, you show you are compliant and only then you are allowed basically to operate. That’s how it works,” Vitrenko said.

“We expect the U.S. government will reconsider their decision and remove this waiver and will impose sanctions on Nord Stream 2. And then … when they see Gazprom has stopped using gas as a geopolitical weapon, when they see that Gazprom and its subsidiary change something so that they are now compliant with European rules, then these sanctions will be removed. That’s the logical approach.”

“When somebody’s in breach, somebody’s using gas as a geopolitical weapon, you sanction this somebody. And when they behave, you remove these sanctions,” Vitrenko said.