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Russia threatens to cut off European gas supply

April 1, 2022

Gas is still flowing to Europe despite a Friday deadline for gas payments to be made in rubles. Germany has called this "blackmail" and insists on paying in euros or dollars.

https://p.dw.com/p/49JJs
The NIehl combined heat and power plant in Cologne
Europe's gas supplies are threatened by Moscow's ultimatum that payments must be made in rublesImage: Martin Meissner/AP Photo/picture alliance

Russia said Friday it will not cut off the gas supply to Europe after Moscow set a Friday deadline for payments to be made in Russia's currency, the ruble.

Kremlin spokesman Dmitry Peskov said that by Friday, foreign gas buyers need to open ruble-denominated accounts at the state-controlled Gazprombank in order to pay. However, payments on deliveries due after April 1 come in the second half of this month and May, he said.

Russian President Vladimir Putin signed a decree on Thursday that stipulated that buyers must make payments in rubles, which Moscow had threatened to do last week. 

Analysts said the move was designed to shelter Russia from sanctions more than block European nations from receiving gas.

Joseph Gatdula, head of oil and gas at Fitch Solutions, told DW, "Russia is heavily dependent on the revenue from gas sales from Europe."

He added, "The idea of cutting off source of foreign income at a time when the ruble has been challenged, accounts have been frozen globally, Russia's access to foreign reserves has been heavily crimped, those types of considerations would exacerbate the economic stress that Russia is under now."

Moscow has sought to leverage its position as an energy exporter in a bid to counter Western sanctions over its invasion of Ukraine. European Union countries have imposed wide-ranging sanctions but stopped short of an energy embargo due to their dependence on Russian gas.

What did Russian authorities say?

"If such payments are not made, we will consider this a breach of obligations on the part of our buyers," Putin said. Russia would then halt existing contracts.

"They must open ruble accounts in Russian banks. It is from these accounts that payments will be made for gas delivered starting from tomorrow," Putin said on Thursday.

Last week, the Russian leader insisted that "unfriendly" countries, including those that make up the European Union, would have to pay for gas imports in rubles.

Gatdula said the payment procedure involving Gazprombank announced Thursday, which allows countries to keep paying in a foreign currency, is "essentially a de-escalation of the initial demand."

"This new kind of detail is a bit of a face saving mechanism in the face of Europe's steadfast position that they will only pay in euros as dictated by the existing contracts," he said. "There wasn't really any practical way without both parties agreeing to change those terms."

What if Russian gas stops flowing to Germany?

Senior Russian Foreign Ministry official Nikolai Kobrinets told the state RIA news agency, "The actions of the EU will not remain unanswered ... the irresponsible sanctions by Brussels are already negatively affecting the daily lives of ordinary Europeans."

Russian gas exports are to continue under Russian rules, Gazprom said, adding that on Friday the company started to notify clients of a requested switch of end-payment currency to rubles.

What was the Western response?

Germany has insisted that it will pay in euros or dollars as stipulated in existing contracts and called Moscow's demand to pay in rubles "blackmail." Before the Russian invasion of Ukraine, Germany imported 55% of its gas supplies from Russia.

France's economy minister said Berlin and Paris were preparing for a scenario where Russia turns off gas taps.

Early in March, the European Union introduced a proposal to reduce dependency on Russian gas by seeking increased supply from the United States and Qatar and by expanding clean energy.

On Thursday, US President Joe Biden announced that the United States would release 1 million barrels of oil per day from the nation's petroleum reserve over six months with the aim of combatting the rise in global gas prices.

sdi/sms (AFP, Reuters)