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Russia threatens to turn off the gas valve if Europe refuses to pay for gas in rubles. “No payment – no gas.” This is a direct threat from Putin’s press secretary Dmitry Peskov, which he later repeated on the American PBS television channel.
Firstly, it sounded immediately after Putin’s instruction to the Russian government, the Central Bank and Gazprom to transfer payments into rubles by March 31 under contracts with “unfriendly European countries” that imposed sanctions against Russia.
Secondly, the threat is also heard against the backdrop of an agreement on US supplies of 15 billion cubic meters of liquefied gas to Europe. Add to this another 22 billion cubic meters of liquefied gas that Europe received last year, and we get 25% of the total volume of Russian gas entering the EU, which Brussels can replace with LNG gas from other countries.
From Russia, Europe receives 40% of gas (that’s about 155 billion cubic meters per year) and 25% of oil. That is, taking into account liquefied gas, next year Europe can replace up to 55 billion cubic meters of Russian exports. However, Putin’s ultimatum concerns primarily Germany, which is most dependent on Russian energy carriers and does not have its own LNG terminals. And it is Berlin, as well as Budapest, that is blocking the introduction of a complete embargo on the purchase of Putin’s raw materials.
TSN.etc I figured out whether Putin was really ready to shut off the gas valve to Europe, what would happen if this happened, and which European countries could agree to pay for Russian oil and gas in rubles.
military logic
Deputies of the Russian State Duma are blunt: the refusal of European countries to pay for gas in rubles will definitely lead to a complete halt in supplies. That is, Putin is ready to turn off the gas valve in order to force, as he believes, Europe to crawl on its knees to Russia, against the backdrop of sky-high prices for blue fuel.
The G7 (G7), which, by the way, is currently chaired by Germany, sharply rejected Putin’s demand to pay for gas in rubles. “Payment in rubles is unacceptable. We urge the relevant companies not to comply with Putin’s demands,” German Economy Minister Robert Habeck said.
According to German Chancellor Olaf Scholz, long-term contracts that various European countries have with Gazprom provide for a fixed currency for paying for Russian gas purchased. And it’s not rubles.
Therefore, if Moscow shuts off the gas valve, continuing to require European countries to buy rubles for dollars and euros in order to pay for the consumed gas, this will be a violation of contractual terms. Then European companies can safely go to the Stockholm arbitration, as Ukraine did in its time, and sue Russia for multibillion-dollar penalties. And if Moscow refuses to pay, in pursuance of the arbitration decision in Europe, Russian assets will be seized.
In addition to gas blackmail, according to Gustav Gressel, a senior fellow at the European Council on External Relations, Putin also demands that money for purchased gas be transferred to the sanctioned Central Bank of Russia. That is, in fact, he wants to force the EU to abandon financial sanctions.
“Practically everyone in the EU agrees that this will not happen. Most countries will transfer money for purchased gas and oil to a neutral deposit account in euros and wait for Russia’s reaction. If they do turn off the gas later, we will see that Europe can actually live without it, which is not so bad. Therefore, I do not think that the Russians will turn off the gas valve, “says Gustav Gressel.
In addition, out of about 240 billion cubic meters of gas that Russia exports, about 155 billion cubic meters goes to Europe. That is, Moscow sells 65% of its gas to Europe. Considering that the spot price is confidently above $1,000 per thousand cubic meters, and more than 50% of the Russian budget revenues come from the sale of oil and gas, a number of logical questions arise. Does the Kremlin not understand this? Why then does Putin want to shoot himself in the foot?
Wrong “shredding”
According to Mikhail Gonchar, President of the Strategy XXI Center for Global Studies, it should be understood that Putin is guided by military-political logic. The Kremlin has already threatened Europe with shutting off the gas valve last fall, when it artificially “dry” the gas market, demanding the certification of Nord Stream 2. Now the slogan “we can repeat”, which they are actively using to remind primarily Germany of the results of the Second World War (as opposed to the Europeans, who say “never again”), they are using in the energy sector.
“Of course, there is a certain group of “Putinfersteyers” in Europe, although their ranks have thinned significantly. Gas weapons work effectively in winter, and not when spring and warm weather. Yes, Russia can cut off gas supplies to the EU. hands. Perhaps this will sober up European leaders even more. The Russians will now try to find one person who will agree to settle in rubles. From among the EU member states, I think it could be Hungary. Hypothetically, Bulgaria could be tempted, although I don’t think. I don’t of the EU members, but the candidates are Serbia,” Mikhail Gonchar comments on TSN.ua.
As for Germany, which is the most dependent on Russian gas among the EU countries, experts do not believe that Putin can completely cut it off from gas. Although a certain reduction in supplies is still possible. But cutting off supplies to Europe’s biggest gas market altogether is, to a certain extent, shooting oneself in the foot. Therefore, Moscow will act by the method of carrot and stick. For example, the whip will be the Baltic countries, Poland, Slovakia, Romania, Czech Republic, which actively support Ukraine. But to Hungary, Austria and Germany – there may be a more loyal approach.
Now Germany, albeit slowly, but admits the mistakes of the past, in particular, the unsuccessful policy of Merkel and previous governments, which drove the country into a total dependence on Russian energy resources. At the same time, it is quite ridiculous to read the explanation of such an erroneous approach, they say, Berlin was guided by the principle that, even under the USSR, Moscow allegedly did not use oil or gas as a weapon. Therefore, the Germans believed that this would continue.
In an interview TSN.ua Sergiy Makogon, Director of the GTS Operator of Ukraine, also recalls that there is still not a single LNG terminal in Germany. Therefore, the question is how they will receive the same liquefied American gas. Yes, Berlin has agreed on the supply of Qatari gas, but this is a 2-3 year horizon. Germany uses a significant amount of gas for power plants. There is a very big difference between how we use gas in Ukraine and how they use it in Germany. We have gas – mainly heating (CHP) and cooking. And in Germany, this is a large generation of electrical energy.
What’s next
According to Adrian Prokip, an energy expert at the Ukrainian Institute for the Future, Europe has brought itself to a critical level of dependence on Russia, and Putin will play on this. Some countries are already preparing for a gas crisis. Belgium has postponed the shutdown of its nuclear power plants until 2035. In France, they are calling for saving gas, although there is not much of it being used there.
“The worst situation with the Germans. I expected that Germany would also postpone the closure of its last three operating nuclear power plants, which is scheduled for 2023, extending the” life “of coal. But so far they have not announced this. And here is the intrigue: will they go for an extension life of coal and atom, so as not to break down in front of the Russians, or they will turn their noses in. If Europe resists, reduces consumption somewhere, replaces coal and atom somewhere, then this will simply be the end of the Russian energy monopoly, “says TSN.ua Adrian Prokip.
The experts with whom TSN.ua spoke are sure that no one will settle accounts with Russia in rubles. In addition, Putin, by his actions, is further pushing the EU to create a common platform for centralized gas purchases, where the European Commission would receive the right to purchase for everyone (as was the case with COVID-19 vaccines), which will help stabilize the price.
Mikhail Gonchar, President of the Strategy XXI Center for Global Studies, recalls that back in 2015, Poland proposed this when creating the EU energy union in order to free itself from Russian blackmail and switch to a unified gas purchase system. But then it was not supported, saying that it violates market principles and approaches, because the European Commission is not a gas trader.
“Now life is pushing for this. And the Kremlin understands the danger for itself of such an approach. After all, then the European Commission or an agency authorized by it with the consent of the member states will carry out centralized gas purchases. And since the one who pays dictates the rules one way or another, Gazprom “It will no longer be possible to implement the “divide and rule” policy, determining which country will receive a lower price. For example, Hungary for the “escort service” of the Kremlin within the EU and NATO and for the anti-Ukrainian position. And someone who takes an opposing position (Poland , the Baltic countries), on the contrary, the prices are maximum,” summed up Mikhail Gonchar.
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