3rd Jul 2022

EU braces for Putin's gas-for-roubles clampdown

  • Russian imports accounted for about 40 percent of EU gas demand (Photo: Jasmine Halki)
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Emergency plans to mitigate gas supply disruptions have been activated by several member states — amid growing concerns over potential shortages given Moscow's demands for gas payments in roubles.

Russian president Vladimir Putin confirmed on Thursday (31 March) that foreign countries will have to pay for gas in the Russian currency or face supply cuts.

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"Nobody sells us anything for free, and we are not going to do charity either — that is, existing contracts will be stopped," Putin said in a televised address.

The Russian president signed a decree that would oblige gas buyers to "open rouble accounts in Russian banks" to purchase gas from 1 April — a move that aims to boost the Russian currency after financial sanctions imposed on Moscow.

"If such payments are not made, we will consider this a default on the part of buyers, with all the ensuing consequences," Putin warned.

The Group of Seven (G7) industrialised nations and several EU countries have vocally refused the gas-for-roubles scheme which they see as a breach of contracts, despite Russia's threats.

But the potential crisis that could unfold has prompted EU countries to take precautionary measures.

Germany and Austria, which are highly dependent on Russian gas imports, triggered the "early warning phase" of their emergency plans this week as a first step to prepare the country for possible shortages. Latvia and Italy had already taken this step.

Russian imports accounted for about 40 percent of EU gas demand in 2021 — a share that has increased in recent years because European domestic gas production declined.

In an effort to reduce EU dependency, the 27-nation bloc agreed to voluntary joint gas purchases and minimum storage requirements.

EU member states will have to ensure storage facilities reach a minimum of 80 percent of their capacity before next winter— up from the current 26 percent-capacity level.

The deputy director for energy at the European Commission, Mechthild Wörsdörfer, told EU lawmakers on Thursday that gas storage was "critical" for the security of supply because it could reduce market volatility and provide stability.

But she pointed out that gas storage-capacity is unevenly distributed across the bloc.

As only 20 EU member states have gas storage facilities, "it is quite important that there is a level of solidarity," she said.

Those in need of gas should be able to syphon it from storage tanks in other member states via a network of pipelines, the commission said earlier this month when it unveiled the proposal.

Putin's rouble shift: mistake or masterstroke?

Russia's plans to demand rouble payments for natural gas purchases from "unfriendly nations," unveiled on Wednesday, further escalated the battle of sanctions with Europe, but experts are divided on what Russia will gain from it.

It's not easy being green — and cutting Russian gas

There are growing concerns that the EU's push for alternative gas sources will simply lead to burning the most-polluting sources as Russian gas gets phased out. But the EU climate chief says there should be no taboos.

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