German chancellor Olaf Scholz has pulled the plug on the controversial 750-mile Nord Stream 2 gas pipeline that connects the Europe’s largest economy to Russia under the Baltic Sea.
He said on Tuesday that the certification of the project could not go ahead given Russia’s latest actions in ordering its troops into two Moscow-backed separarist controlled regions in Ukraine.
Germany had been reluctant to include the €10bn (£8.4bn, $11.4bn) pipeline in any sanctions, as the move is set to hurt its own gas supplies.
However, it has faced scrutiny from the US and other European countries, including the UK, as the operation would have increased European reliance on energy from Russia.
Scholz said the circumstances had now “fundamentally changed”, calling Putin’s move a “serious breach of international law.”
"The situation we find ourselves in today is a completely different one,” he said. "That sounds technical, but it is the necessary administrative step so there can be no certification of the pipeline and without this certification, Nord Stream 2 cannot begin operating."
It came after Ukraine's president also demanded an immediate halt to the pipeline on Tuesday.
Volodymyr Zelensky told a press conference that Russia must be punished for its recognition of two rebel-held regions in eastern Ukraine with "immediate sanctions", including "the complete stop of Nord Stream 2".
Although Nord Stream 2 was completed last September, is not yet operating.
What does this mean for prices?
The Nord Stream 2 pipeline is able to carry enough natural gas from Russia to fuel 26 million households in Europe. If it was in operation it would have helped to ease the soaring energy prices currently hitting Britain and Europe.
Vice-chancellor and economy minister Robert Habeck told reporters that Germany's gas supply was secure even without Nord Stream 2, which would have doubled the amount flowing into the country from Russia.
The European Commission (EC) also said Europe's energy supply would not be affected by the move because the pipeline was not yet operating.
"It's not a different source of energy, it's a different pipeline for an existing supplier... There's no change in the current situation,” a spokesperson said.
However, Habeck did predict that gas prices would increase further in the short-term.
Watch: Ukraine crisis: Germany halts approval of Nord Stream 2 gas pipeline from Russia
Germany meets about a quarter of its energy needs with natural gas, a share that will increase in the coming years as the country switches off its last three nuclear power plants and phases out the use of coal.
Around half of the natural gas used in Germany comes from Russia.
Although Britain does not import much of its gas directly from Russia, it does import from Europe, which gets around 40% of its gas from the country.
Gas prices in Britain and Europe climbed as much as six-fold last year, pushing dozens of UK energy suppliers into administration and causing household bills to soar. The latest move could see prices in the UK escalate further if geopolitical tensions continue at length.
There are also mounting fears that Russia may stop gas supplies in the near future for political reasons. Russia is the world’s second biggest producer and exporter of oil and the biggest exporter of natural gas.
Watch: Why are gas prices rising?