Russian gas flowed into Europe while regional gas prices rose further on Friday as firms grappled with President Vladimir Putin’s threat to cut off supplies unless they paid in rubles.
The Kremlin said it would not turn off gas exports to Europe from Friday as payments on deliveries due after April 1 come in the second half of this month and May.
Under Putin’s decree, foreign buyers of Russian gas must open ruble accounts in Gazprombank from Friday so foreign currency can be converted to rubles.
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Analysts said the plan, which puts state-controlled oil and gas company Gazprom at the heart of Russian gas trade, was more about shielding it from future sanctions than depriving Europe.
“It is of course a game to dodge sanctions, adding to uncertainty, propping up gas prices and filling Putin’s pockets,” a European gas trader said.
The move has caused consternation in Europe, which relies on Russia for more than a third of its gas supply, and among companies buying Russian gas to generate electricity for industry and heat homes in the region.
Ditte Juul Jorgenesen, director general of the European Commission’s energy division, said on Twitter that European Union coordination was taking place to figure out a common approach on currency payments.
“Working closely with Member States and operators. EU coordination today to establish a common approach on currency payments for gas contracts with Russia,” Jorgenesen tweeted.
The European Commission declined further comment.
Gazprombank
Energy exports are Putin’s most powerful lever as he tries to hit back against sweeping Western sanctions imposed on Russian banks, companies, businessmen and associates of the Kremlin in response to Russia’s invasion of Ukraine, which Moscow calls a “special military operation.”
But Russia does not have an alternative market to deliver its natural gas to, so stopping flows would also hit its income.
Putin’s decision to enforce ruble payments has boosted the Russian currency, which fell to historic lows after the February 24 invasion. The ruble has since recovered much lost ground.
European buyers are still prepared to buy gas under existing contracts while they seek clarity on Putin’s demand.
Austria’s OMV and Russia’s Gazprom have had initial contact about paying for gas in rubles, a spokesperson for OMV said on Friday, adding that the company is still waiting for written information.
Denmark’s Orsted, which has a take-or-pay contract with Gazprom running until 2030, said it had not yet received any enquiry from Gazprom.
“Therefore we still do not know what the [Putin) statement will actually mean for the contract and for the supply of gas from Russia to Danish and European households and businesses,” Orsted said in a statement.
Gazprom said on Friday it had started to notify clients of a requested switch of end-payment currency to rubles.
So far, Gazprombank has been spared from a ban on Russian banks transacting through the SWIFT payments messaging system although Britain did freeze its assets last week.
Britain, however, only gets about 4 percent of its gas from Russia compared to around 40 percent for Germany and a third for the entire region.
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