Friday, December 9, 2022
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Russia Threatens to Cut all Gas Supply to Europe, Unless Paid in Roubles

Russia has warned “unfriendly” foreign countries that unless they pay for gas in roubles, supply would be halted.

From Friday, Vladimir Putin has issued a directive requiring purchasers to “establish rouble accounts in Russian banks.”

“No one sells us anything for free, and we are not going to do charity,” Russian President Vladimir Putin stated. “Existing contracts will be terminated.”

Mr Putin’s proposal has been interpreted as an attempt to strengthen the rouble, which has been weakened by Western sanctions.

Foreign customers of Russian gas would have to create an account with Russia’s Gazprombank and deposit euros or US dollars into it, according to his regulation.

The money would be converted into roubles by Gazprombank, which would then be used to pay for gas.

Despite the fact that the order goes into force for gas shipped on Friday, European purchasers would not pay for that gas until mid-May, according to Dr. Jack Sharples, a research fellow at the Oxford Institute for Energy Studies.

This means that there isn’t a serious danger to supply right now.

Mr Putin stated that the changeover to roubles was intended to reinforce Russia’s sovereignty, and that if Western nations complied, Russia would honor all contracts.

Mr Putin’s announcement amounted to “blackmail,” according to Germany.

Since Russia’s invasion of Ukraine, Western nations have imposed economic and trade sanctions on Russia, but the European Union, unlike the United States and Canada, has not imposed oil or gas prohibitions, despite the fact that its member countries rely substantially on it.

The EU imports over 40% of its gas and 30% of its oil from Russia, and there are no cheap alternatives if supplies are stopped. Meanwhile, Russia receives €400 million (£340 million) each day from gas sales to the EU, with no means to divert this supply to other markets.

Germany, which imports almost half of its gas and a third of its oil from Russia, has advised residents and businesses to cut back on their use in preparation of potential shortages. Austria, which buys almost 40% of its gas from Russia, is increasing its market surveillance.

The “early warning phase,” which both Germany and Austria have started, is the first of three phases in an existing gas emergency plan meant to prepare the country for a probable supply crisis. Gas restrictions would be implemented at the end of the process.

In other news, Bulgaria has announced a tender for underground drilling as part of preparations to nearly increase the country’s gas storage capacity and prepare for potential supply disruptions. Bulgaria imports 90 percent of its gas from Russian giant Gazprom.

While the UK would not be directly harmed by a supply disruption because it imports less than 5% of its gas from Russia, it would be affected by rising global market prices as European demand grows.

The UK government has stated that it will not be paying for Russian gas in roubles.

Bob Carlson
Bob Carlson
Bob Carlson is a business journalist, with over a decade of experience in the trenches of reporting up-to-date business news for publications all over the world. With a wealth of knowledge at his back, Bob strives to bring the most important insights into the business world for TheOptic daily.
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