EU and Russia in stand-off over rouble payments for gas

Europe and Russia are locked in a confrontation over Moscow and insist its gas will be Paid in rublesIncreases the chance of a supply stoppage when the Kremlin doubles its requirements.

Russian officials said on Tuesday that Moscow would not “supply free gas” to Europe, a day after G7 countries unanimously rejected President Vladimir Putin’s directive.

“Payments will be accepted in rubles only,” Kremlin spokesman Dmitry Peskov was quoted as saying by the Russian state news agency Interfax. “Companies need to understand the changing market situation, the completely new reality that has been revealed within the economic war waged on Russia.”

European leaders have said payments must continue in euros or dollars, questioning the legality of Putin’s proposed move in the gas industry where long-term contracts dominate.

Robert Habakkuk, the German economy minister, said this week that payment in rubles is not acceptable. “We call on the relevant companies not to comply with Putin’s demand,” he said after a meeting of G7 energy ministers in Berlin.

European customers of Gazprom, Russia’s state-owned gas supplier, said supply contracts did not allow payment in rubles.

Pavel Majewski, CEO of the state-controlled Polish gas company PGNiG, said last week that “there is not much possibility” of transferring Gazprom payments to the ruble.

The three largest buyers of Russian pipeline gas in Europe are German electricity company Uniper, Turkish Botas and Italian energy company Eni, each receiving more than 20 billion cubic meters of gas a year from Gazprom, according to energy consulting firm ICIS.

The Austrian energy marketing group OMV said that Gazprom Export, its contractual partner, had not yet announced a potential change in the payment currency. Unifer, RWE and Engie declined to comment.

Claudio Descalci, CEO of I, said on Monday that a mutual agreement would be the only way to change the payment currency, but it would be difficult to agree “because we just do not have” a ruble.

Ann-Sophie Corbo, a researcher at Columbia University’s Center for Global Energy Policy, said European buyers are in a difficult position as they try to stick to EU plans to reduce reliance on Russian gas given contracts that set minimum purchases.

“You can not just decide to reduce your quantities by two-thirds,” she said. “There is a sanctity of long-term contracts and that is an important thing in the gas business.”

TotalEnergies of France has warned that the cessation or modification of these long-term contracts would be difficult without specific sanctions on the energy sector.

“It is difficult to see how we can change the format of the contracts in any way. If there are sanctions, then contracts can be suspended in some way,” said one source close to a French energy group that imports gas.

Jonathan Stern, a research fellow at the Oxford Institute for Energy Research, said: “You want to respond to people who say you refuel the Russian war machine but we are talking about sums of money that are eye-opening here.”

Gazprom and the central bank are scheduled to report to Putin on Thursday with a clear mechanism to facilitate payments in rubles. Analysts said Gazprom could try to renegotiate contracts, but it would leave it vulnerable to customer demands to reduce contract volumes or contract lengths.

The EU currently buys 300 million cubic meters of Russian pipeline gas a day. ICIS estimates that Gazprom earned about $ 340 million a day from gas sales between the beginning of the war and March 15.

Another report by James Policeman in Warsaw

EU and Russia in stand-off over rouble payments for gas Source link EU and Russia in stand-off over rouble payments for gas

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