Gazprom may stop gas supplies to Europe, the Kommersant newspaper reports, citing sources. On March 30, Germany and Austria introduced the first level of emergency in gas supply.
There is a risk of total cessation for the first time in the history of Russian gas supplied to Europe. Gas supplies had continued uninterruptedly during the Cold war. According to Kommersant’s sources, Gazprom is considering the possibility of a complete halt in gas supplies to “unfriendly countries” and is assessing the consequences of such a step.
Russian President Vladimir Putin instructed the Central Bank, Gazprom and the government to organize mutual settlements for gas with the E.U. countries and other countries that have introduced restrictive measures in rubles.
The Russian authorities will disclose the mechanism for converting payments for gas into rubles on March 31. Supply volumes, prices and pricing principles will remain the same, as per the Russian media.
How are Gazprom’s customers reacting?
The G7 countries – the United States, Japan, Germany, Great Britain, France, Italy and Canada – believe this is a unilateral breach of contracts and refused to pay for gas in rubles. The European Commission (E.C.) – the highest executive body of the European Union (27 member countries), also rejected the possibility of paying for the supply of Russian “blue fuel” in rubles. German Economic Minister Robert Habeck stressed that gas would be paid in the currency specified in the agreements.
The Japanese government specifically asked companies not to agree to pay for Russian liquefied natural gas (LNG) in rubles if they receive the appropriate requirements; Hirokazu Matsuno, Secretary-General of the Japanese Cabinet of Ministers, said at a press conference.
Moldovagaz did not receive a notification from Gazprom about the transition to rubles in payments for gas, said Vadim Cheban, chairman of the board of the gas distribution company. According to the agreement, he informed that Moldovagaz can settle accounts with Gazprom in dollars, rubles or euros until May 1, 2022. After this date, settlements in dollars are excluded, and the company will most likely pay for gas in euros due to the shortage of Russian currency in the republic.
Not ready to receive rubles and the largest transit country of Russian gas – Ukraine said the Ukrainian Minister of Energy Herman Galushchenko. The Minister added that it is difficult because these are not bilateral agreements but agreements between the E.U. and Russia.
When asked whether Ukraine would stop transit if the E.U. countries did not agree to pay for gas in rubles, Galushchenko replied that “the Russians should then tell the Europeans: if you do not want to pay in rubles, then goodbye, we cut off gas supplies.” In his opinion, the E.U. is not yet ready for this scenario.
Galushchenko also believes that Gazprom is not ready to block supplies either: transit has grown to about 107-109 million cubic meters per day.
It remains to be seen if the E.U. countries will maintain a unified approach, and if not, whether those who agree to pay in rubles will share gas with their neighbours.
E.U. legislation provides for the principle of solidarity. The Member States must help their neighbours in a serious gas crisis to prevent any disruption in the supply of gas to households. The first bilateral solidarity agreement was signed between Germany and Denmark on December 14, 2020, and the second was between Germany and Austria on December 2, 2021. On March 30, it was reported that Greece also intends to sign such an agreement with Germany, which will concern the pooled storage of gas.
Premiers of Italy, France and Germany speak to Putin
The Kremlin press service said that Russia and Germany would hold additional talks on paying for gas on March 30 following talks with German Chancellor Olaf Scholz. Also, on March 30, the issue was discussed with Italian Prime Minister Mario Draghi and with French leader Emmanuel Macron the day before. According to Executive Vice President Frans Timmermans, the European Commission has been preparing for some time “for any potential situations that may arise, but which, we hope, will not materialize.”
Gas reserves in E.U.
According to AGSI +, gas storage in Germany is now filled by 26.5%, Austria – by 12.8%. Europe has set itself the task of filling 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 the Russian Federation, it will be challenging to do this – now, the total level of reserves is only 26.28%. A detailed E.U. plan to cut off Russian energy resources will be ready in May, but the member states are already declaring their intention to increase imports of non-Russian gas. In particular, the U.S. authorities promised to supply an additional 15 billion cubic meters to Europe this year; in 2021, the volume of deliveries amounted to about 20-21 billion cubic meters.