Baltic NATO States Warn on Gas Flow After Russian Vessel Appears

(Bloomberg) -- Baltic officials on NATO's eastern frontier warned of potential energy-supply disruptions after a Russian vessel unexpectedly appeared in the region, stoking speculation over the Kremlin's intentions in the standoff with Ukraine.

The Marshal Vasilevskiy, a Gazprom PJSC-owned vessel laden with liquefied natural gas, was dispatched to the Russian exclave of Kaliningrad for the first time in about two years. That's prompted questions over whether Russia is preparing for a cutoff in gas supply that would affect the territory wedged between Lithuania and Poland. Gazprom declined to comment.

“Regarding the LNG vessel, we are aware of this information and are working indeed to make sure our energy system is ready for any surprises,” Prime Minister Ingrida Simonyte told national broadcaster LRT. “That said, it doesn't mean something will happen -- but we need to be prepared.”

The defense minister of neighboring Latvia, Artis Pabriks, went further, saying that the presence of the LNG ship was a prelude to a Kremlin move to shut off supplies to the EU itself.

“Russia would soon be ready to cut the natural gas flow to the EU without hurting the people in this region,” Pabriks said in a post on Twitter, referring to Kaliningrad. “Great news to all Europeans who are Russian gas lovers.”

The guessing game over the maritime movements underscores the heightened tension between Russia and western nations, which have threatened brutal sanctions if President Vladimir Putin escalates a standoff with Ukraine. U.S. and European Union sanctions would have a huge impact on Russian energy supplies to Europe.

That's led to the tea-leaf reading over Kaliningrad, a territory separated from Russia after the map of Europe was redrawn after World War II and the Baltic states, including Lithuania, declared independence with the collapse of the Soviet Union three decades ago. The territory normally receives gas through a pipeline via Belarus and Lithuania.

The geopolitics matter to Lithuania, a nation of 2.8 million that imports around 1 billion cubic meters of natural gas from Russia annually. Data from Lithuania's gas-network operator Amber Grid shows natural gas flows across the nation toward Kaliningrad have been unaffected -- and reached 4,136.05 megawatts per hour as of 1 p.m. local time -- as have flows to Lithuania itself.

However the energy supplies may be disrupted, Russia is unlikely to cut off gas to Europe, said BCS Global Market analyst Ron Smith, because it would have “long-term consequences for Russia, the cost of which are impossible to calculate but would almost certainly exceed the value of any short-term gains.”