Last year, Vladimir Putin sent shockwaves through the markets when he stated that non-friendly countries had to pay for Russian gas in rubles.
Putin’s statements were met with opposition from several countries, who thought the demand was completely unacceptable. Many breathed a sigh of relief when Putin on Wednesday told German Chancellor Olav Scholz that Russia would still let Europe pay for Russian gas with euros.
On Thursday, however, Putin issued a confusing message: Buyers of Russian gas should open a ruble account in a Russian bank and pay for the gas through it. Putin threatens to cut gas supplies to buyers who do not meet the demand.
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– Blackmail
– If these payments do not take place, we will consider them as a default on the part of the buyers, with all the consequences that this entails. Nobody sells us anything for free, and we are not going to run a charity either. This means that existing contracts will be suspended, warned Putin on Russian television according to Reuters.
Rystad analyst Romano believes that each buyer and each country can be assessed individually, and that Russia will have to notify each buyer of the details of the change as part of changing the gas contracts.
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“There is only one way to understand it where these two statements can coexist, and that is if there are different measures for so-called friendly and non-friendly countries,” Rystad Energy analyst Vinicius Romano said in a statement on Friday morning.
– This is basically a standstill: If the buyers follow the current conditions in the contracts, a halt in gas deliveries from Russia could have consequences for the seller. Buyers can trigger “non-delivery” clauses in the contracts, which could open up for claims from Gazprom, according to Romano.
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The gas price on the Dutch TTF exchange reached 133 euros per megawatt hour on Thursday, which is the highest in three weeks. On Friday morning, the gas costs around 123 euros per megawatt hour.
Germany is among Russia’s largest gas customers, but says the country will not meet the requirement to pay for the gas in Russian rubles.
“It is important for us not to signal that we are giving in to blackmail from Putin,” German Deputy Chancellor Robert Habeck said. Reuters.
Russia has no alternative buyers of Russian gas, and a halt in gas exports will mean an abrupt halt to a significant source of revenue for the Kremlin.
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Will give losses on both sides
Russia can replenish its own gas reserves for a short period of time if Europe no longer receives or wants to buy Russian gas with rubles as a means of payment. But afterwards, the gas will have to be flared and parts of Russia’s oil and gas business will be closed in an extreme scenario, according to Rystad analyst Romano.
Both Germany and France stand their ground, demanding to pay for Russian gas in euros. However, French Finance Minister Bruno Le Maire has said that both Germany and France are preparing for a complete halt to Russian gas supplies.
“Both sides will lose out on this,” writes Rystad analyst Romano.
In Europe, a search is now underway for alternative sources of gas supplies, but the European gas market is extremely tight. The United States has previously announced that it will increase production of liquefied natural gas (LNG), but the new production will not be large enough to offset the loss of Russian gas supplies.
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