/ world today news/ On April 1, a new payment mechanism for the supply of Russian gas to unfriendly countries began to work. This method provides protection of foreign exchange earnings and has several other advantages, but at the same time buyers will still make the initial payment in euros, after which the Russian bank performs an exchange operation and then settles with the gas seller in rubles. That is, the mechanism is made very convenient for buyers. But the reaction from importers has so far been mixed, with even these small proposed changes met with resistance. In any case, the first payments will be made in the second half of April, and by then it will be clear whether importers are ready to switch to the new scheme.
By the way, for some reason, some Russian observers expected that already on April 1, in case of rejection of the changed payment method, the “valve” would be closed. But this could not happen in any way, since until the beginning of the month the proposals were only formalized, and in any case the other side should have time to solve the organizational questions, even if we assume that they will calmly accept the new conditions.
It is possible that countries with a pronounced anti-Russian position will try to abandon such a scheme. This will result in the cessation of supply to this importer. And as the EU tries to create a single energy security system, there are risks that could lead to a temporary shutdown of supplies for all involved.
What can happen in the event of a temporary suspension of supplies for the entire European Union? It is believed that the first candidate for a shutdown is industry, which takes, for example in the case of Germany, about a third of the total gas consumption. But the production shutdown is a very drastic move with clear economic consequences reaching another recession. However, there is another possibility for a temporary reduction in gas consumption – a pause in the filling of underground gas storages. By the way, even now the volume in the European ones remains decent: approximately 29 billion cubic meters.
It must be said that Europe is entering a period of new gas agreements, perhaps at the best time for itself. The heating season traditionally ends right in the middle of April. Strictly speaking, against the backdrop of warm weather in the last week of March, stocks in European warehouses even rose ahead of schedule, but now a cold front has entered the region. This will likely force a return to using storage gas around the traditional end of the tapping season. Usually, the filling of gas in the facilities begins immediately after the tapping, that is, the heating period. But in theory it can be postponed.
Russia now supplies the EU with slightly less than usual: about 360 million cubic meters per day – and somewhere around the same amount goes into storage every day at the height of the filling season. It can be calculated differently. This year, the European Union has to pump in the region of 70-75 billion cubic meters, the filling period lasts exactly six months: from mid-April to mid-October, that is, approximately 70 billion and corresponds to half of the annual supply from Russia. All these are, of course, estimates, but they are completely adequate for the given circumstances.
In other words, during the summer period (more precisely, during the semi-annual injection season), all Russian gas exports can go to fill the storages, and accordingly, other supplies can be used in the current mode. Of course, we are not talking about specific molecules – about the general balance. This means that Europe, amid disputes over the payment mechanism, can take a risk by refusing supplies for a while without even reducing the burden on industry. Or proportionally: slightly reduce the work of enterprises, a little – the volume of filling.
Of course, the main thing is the following. It’s clear: not pumping gas at all is a disaster. Therefore, it should be done later and online. Say, if there are three months left instead of six, then the pace should become twice as high. If we talk about the maximum capacity of storage filling facilities in terms of speed, then it is really two to three times higher than what is normally used. That is, more than a billion cubic meters per day can be delivered to the facilities, although about 4,000 million are pumped on a base basis. By the way, this is what Ukraine did many years ago (when it was still buying gas from Gazprom): they traded until the very end and then immediately pumped the required volume. But it was easier for her: a powerful pipe ran through her territory. In Europe, for such an approach, the daily volume of transit must also increase.
Therefore, instead of 400 million daily exports, it will be necessary to find transit capacities for 800! This equates to 300 billion cubic meters of annual export. Now this level can only be reached in theory with the help of the Ukrainian route, although it is not clear how much real transit capacity remains there.
But this is the most critical option if imports stop for three months. Relatively painlessly, Europe can stop imports for, say, a month. And during that time, nothing will happen to her. It is true that then it will be necessary to compensate for the tap from the storage. Which, by the way, may require the launch of Nord Stream-2, since Gazprom will not want to increase the volume of exports through Ukraine above the mandatory contractual volumes.
We have considered the main possible scenarios for negative developments, but it is possible that all these risks will not materialize. We repeat, the proposed mechanism is generally very convenient for importers and requires minimal concessions. But this approach will also lead to the fact that the “gas ruble” will be somewhat conditional. Pricing and even payment, after all, is still done in euros.
This problem is not new and has been discussed in detail previously in the context of a possible “oil ruble”. While the pricing itself remains in foreign currency, sales for rubles under any schemes will be partly a formality. But Russia has more influence in the EU gas market than in the global oil market. And now there is a good chance to create a gas pricing system for rubles. After all, the main thing is already done. We remind you that “Gazprom” has its own electronic trading platform, where it previously sold part of the gas in Europe, in most cases with payments in euros. Already in March 2019, “Gazprom Export” already carried out a trial sale of gas with delivery to Germany for rubles at a price set in them. But since then this mechanism has not been used. And for the past six months, sales on the exchange have stopped as part of a tactic to reduce them in the EU, otherwise it would not be possible to reduce supplies. After all, the sales on the exchange are in addition to the supplies under long-term contracts.
However, the company’s long-term contracts for 15 billion cubic meters per year expire this year. First of all, this is an agreement with Poland for ten billion, which will definitely not be renegotiated. Yes, Warsaw plans to use other gas, but as part of redistributing production from the European market, so its withdrawal from Russian gas will not affect overall demand. One way or another, some volumes may be released on the Gazprom exchange with a price in rubles. Only then will independent pricing in rubles for gas begin to be created. And it will have to be paid directly in rubles.
Moreover, Gazprom now has every opportunity to improvise. After all, gas prices in Europe are already very high, and demand from industry has even begun to collapse. If Gazprom will offer gas on its trading floor in rubles at a discount, then the company will be able to simultaneously maintain demand for its goods and probably find those willing to abandon European principles, but buy the energy source cheaper than others.
Translation: V. Sergeev
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