For the UK, around 8% of oil and less than 3% of gas is supplied by Moscow. Britain proposes a ban on Russian oil imports. Purchases from the continent are made by energy companies, such as E.ON, Uniper and RWE, rather than governments, via contracts usually denominated in dollars or euros.
What was the reaction?
Unfortunate. Robert Habeck, Germany’s economy minister, said on Tuesday that G7 ministers had “agreed that this was a unilateral and clear breach of existing contracts”. Payment in rubles is unacceptable, he added, “and we call on the companies concerned not to comply with Putin’s request”. The move was an “attempt to divide us” that would fail, Habeck added.
Importers including France’s Engie and Austria’s OMV said they intended to continue paying in euros or dollars in accordance with their contracts, the Financial Times reported.
What happens if buyers refuse to comply?
Russian supplies to Europe could be interrupted – either by buyers stopping their purchases or by Russia stopping sales. Kremlin spokesman Dmitry Peskov told reporters on Monday “clearly we’re not going to provide gas for free.” He added: “In our situation, it is hardly possible and feasible to engage in charity work for Europe.
It is unclear, however, whether Russia will go so far as to cut off supplies, as the country is keen to maintain its reputation as a responsible gas supplier.
Experts say what really matters for Russia is the ongoing energy sales, rather than the currency used to buy it. “Energy exports give Russia purchasing power, which it can convert into goods from abroad,” Robin Brooks, chief economist at the Institute of International Finance, told AFP.
What are the preparations in case of a cut in Russian energy exports?
Importers take the threat seriously. Germany, which is among the countries most dependent on Russian gas, launched the first stage of its national gas emergency plan on Wednesday morning, indicating that there is a “serious risk” of disruption. According to S&P Global Platts, this requires a crisis team to assess the supply situation, with the second tier only being activated in the event of a supply disruption.
The move pushed gas prices up, from €110 per MWh to €122 per MWh in Europe and from 280 pence per therm to 298 pence per therm in Britain. Europe as a whole has tried to reduce its dependence on Russian supplies, recently striking a deal with the United States to bring in more gas from across the Atlantic.
The European Commission assessed scenarios that included a complete shutdown of Russian gas supplies next winter. An immediate cut in Russian exports would, however, have serious consequences, with gas rationing and industrial users being the first to be affected.
What does the next 24 hours have in store for us?
Gas currently flows normally from Moscow to the EU. Russia, however, said it would work out practical arrangements for foreign companies to pay for their gas in rubles by Thursday – a key day in the stalemate. Analysts say it’s now a matter of who blinks first.
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This notice was published: 2022-03-30 11:04:51