The fate of Russian gas supplies to Europe, which did not freeze even in the midst of the Cold War, remains uncertain. The largest European countries have refused Russian President Vladimir Putin’s demand to pay in rubles and are now afraid of outages: on March 30, Germany and Austria imposed the first level of gas emergency. Russian authorities must reveal the mechanism for converting gas payments into rubles on March 31. At the same time, according to Kommersant, Gazprom is working on a scenario of supply disruption.
Gazprom’s European customers are increasingly afraid of supply disruptions amid Russia’s demands to pay for gas in rubles. On March 30, the German and Austrian authorities introduced an early warning of a possible gas emergency and called on citizens to reduce consumption. According to Kommersant sources, Gazprom is indeed working on the possibility of a complete halt to gas supplies to “unfriendly countries” and is assessing the consequences of such a move. Payment for deliveries under long-term contracts of Gazprom in March should be made on April 1.
Gazprom refused to discuss the issue. Russian President Dmitry Peskov’s spokesman did not comment on Kommersant’s information, but told reporters that the process of paying for Russian gas in rubles would not be launched directly on March 31: “Payment and deliveries are a time-consuming process … will be delivered, must be paid (in rubles) “.
President Vladimir Putin has instructed Gazprom to switch to ruble payments for gas exported to “unfriendly” countries, and the Central Bank and the government to work out a procedure for acquiring rubles for European companies by March 31. The Kremlin has signaled that if buyers do not agree to pay in rubles, Russia will refuse supplies. On March 29, Dmitry Peskov stressed that Moscow, of course, is calculating an action plan in case European counterparties do not pay in rubles, adding that “there is no free gas.”
European leaders and large consumers have unanimously rejected the idea, mostly calling it a breach of existing contracts, where payments are mostly denominated in euros and dollars. According to Kommersant, European companies are also worried that the purchase of rubles could force them to interact with the Central Bank of the Russian Federation, which is under EU and US sanctions.
Russia and Germany will hold additional talks on gas payments, the Kremlin’s press service said on March 30 following talks with German Chancellor Olaf Scholz. Also on March 30, the issue was discussed with the Prime Minister of Italy Mario Draghi, and the day before – with the leader of France Emmanuel Macron. The European Commission, according to Executive Vice President Frans Timmermans, has been preparing for some time “for any potential situations that may arise, but which, we hope, do not materialize.”
So far, Russian gas exports to Europe remain stable: transit through Ukraine is 109.5 million cubic meters per day, through Nord Stream to Germany – 170 million cubic meters per day. Balancing transit through Poland via the Yamal-Europe gas pipeline has been used at a minimum level since the end of 2021.
According to AGSI +, gas storage facilities in Germany are now 26.5% full and in Austria 12.8%. Europe has set itself the task of filling the storage facilities by 80% by the beginning of the new heating season, while reducing purchases of Russian gas. But in the absence of supplies from Russia, it will be difficult to do so – now the total level of stocks is only 26.28%. A detailed EU plan to phase out Russia’s energy resources will be ready in May, but member states have already announced plans to increase non-Russian gas imports. In particular, the US authorities have promised to supply an additional 15 billion cubic meters to Europe this year, in 2021 the volume of supplies amounted to about 20-21 billion cubic meters.
An important question is whether the EU countries will maintain a common approach, and if not, whether those who agree to pay in rubles will share gas with their neighbors. For example, Hungary has repeatedly stressed that it cannot give up Russian energy, and has not publicly stated its position on ruble payments.
Each country now has a preventive action plan with early warning mechanisms and an emergency plan. “These plans include both market measures, such as requiring suppliers to look for alternatives quickly, and direct government intervention by instructing companies to stop supplying gas to industrial facilities,” said Maria Belova of Vygon Consulting. She clarifies that such plans appeared after the gas crisis of 2009, when the physical transit of Russian gas through Ukraine was stopped for several days.
In addition, EU law provides for the principle of solidarity: Member States must help their neighbors in the event of a serious gas crisis to prevent any disruption to gas supply to households. The first bilateral solidarity agreement was signed between Germany and Denmark on 14 December 2020, and the second between Germany and Austria on 2 December 2021. On March 30, it was reported that Greece also intends to sign such an agreement with Germany, it will concern the joint storage of gas.