Russia and the West are at odds over gas payments in rubles

Russia has said it will not ship gas to Europe free of charge as it is working out methods to accept payments for its gas exports in rubles, but the G7 countries reject the demand.

Kremlin spokesman Dmitry Peskov (left) with Russian President Vladimir Putin. file image.
Photo: Sefa Karacan/Anadolu Agency via AFP

A meeting of European Union leaders on Friday failed to agree on a common position on Russia’s demand last week that “unfriendly” countries pay for its gas in rubles, not euros, after the United States and European allies have joined forces in a series of sanctions against Russia.

Concerns about security of supply were heightened after demand, with companies and EU states scrambling to understand the implications.

The Central Bank of Russia, the government and Gazprom, which accounts for 40 percent of Europe’s gas imports, should present their proposals for ruble gas payments to President Vladimir Putin by March 31.

“We will not supply gas for free, that’s clear,” Kremlin spokesman Dmitry Peskov said in a conference call. “In our situation, it is hardly possible and appropriate to get involved in charities (with European customers).”

In an interview with American public broadcaster PBS later Monday, when asked if the gas would be turned off for non-payers, Peskov replied: “No payment – no gas.”

But he added that Russia has yet to make a final decision on how to react if European countries refuse to pay in Russian currency.

The energy ministers of the group of seven industrialized nations are now rejecting the ruble payment demands, said Germany’s Economics and Climate Protection Minister Robert Habeck after talks with his counterparts.

“All G7 ministers agree that this is a unilateral and clear violation of existing treaties,” he told reporters after a virtual conference with G7 energy ministers.

The ministers “emphasised once again that the concluded contracts are valid and companies should and must respect them… Payment in rubles is unacceptable and we call on the companies concerned not to comply with Putin’s request,” he said.

The Sayda compressor station connects the Czech Gazela pipeline with the German OPAL pipeline in Germany.  The Gazela pipeline serves to transit Russian liquefied natural gas (LNG) to the European Union.

The Gazela pipeline serves to transit Russian liquefied natural gas to the European Union. file image
Photo: Sputnik over AFP

energy security

Dutch and British wholesale gas prices rose as much as 20 percent on Monday amid concerns over Russian gas supplies.

The EU aims to reduce its dependence on Russian gas by two-thirds this year and end Russian fossil fuel imports by 2027. Russian gas exports to the EU totaled around 155 billion cubic meters (bcm) last year.

On Friday, the United States announced it will work to ship 15 billion cubic meters of liquefied natural gas (LNG) to the European Union this year.

US LNG plants are producing at full capacity and analysts say most of the additional US gas sent to Europe would have to come from exports that would have gone elsewhere.

Russian lawmaker Ivan Abramov said a G7 refusal to pay for Russian gas in rubles would result in a clear halt to supplies, according to the RIA news agency.

Abramov sits on the economic policy committee of the Federation Council, the upper chamber of the Russian parliament.

The German Habeck called Russia “an unreliable energy supplier”.

Asked what will happen if Russia stops gas supplies, he added: “We are prepared for all scenarios and not just since yesterday.”

However, the EU will struggle to replace all Russian gas exports in a short period of time, experts said.

Russian gas supplies to Europe on three main pipeline routes were stable on Monday, with the Yamal-Europe pipeline continuing to flow eastward from Germany to Poland, operator data showed.

Russia’s Gazprom said it would continue to supply natural gas to Europe via Ukraine, in line with requests from European consumers.

– Reuters

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