Gas shortages loom if Europe fails to pay Russia in roubles

Frankfurt/London — Russia said it will work out practical arrangements by Thursday for foreign companies to pay for its gas in roubles, raising the probability of supply disruptions as Western nations have so far rejected Moscow’s demand for a currency switch.

President Vladimir Putin’s order last week to charge “unfriendly” countries in roubles for Russian gas has boosted the currency after it fell to a record low when the West imposed sweeping sanctions against Moscow over its invasion of Ukraine, which also sent European gas prices higher.

“No-one will supply gas for free, it is simply impossible, and you can pay for it only in roubles,” Kremlin spokesperson Dmitry Peskov told reporters on Tuesday.

The move has drawn strong criticism from European countries, which pay for Russian gas mostly in euros and say Russia is not entitled to redraw contracts. Group of Seven (G7) nations rejected Moscow’s demands this week.

Russia has so far met its contractual obligations for gas supplies to Europe.

Peskov said that in line with a March 31 deadline set by Putin, “all modalities are being developed so that this system is simple, understandable and feasible for respected European and international buyers”.

Putin’s demand has stoked fears in Germany, Europe’s top economy, about major disruptions to gas supplies if utilities fail to pay in roubles, and how this would affect industry and households.

Data from Gas Infrastructure Europe shows gas storage levels on the continent stand at 26%, highlighting the challenge to replace Russia as an energy provider.

Markus Krebber, CEO of Germany’s largest utility, RWE, and a customer of Gazprom, said earlier that a complete stop of Russian gas imports could be tolerated only for a very brief period.

Germany will need three years to organise alternative gas supplies to become independent from Russia, Leonhard Birnbaum, the CEO of utility E.ON, said on Monday.

Peskov said Russia has been and will be a reliable supplier of gas. But foreign companies need to buy roubles and use them to make payments for gas, he added.

Separately, Valentina Matviyenko, the speaker of the upper house of parliament, said Russia is ready if Europe refuses to buy Russian energy supplies. If that happens, it could redirect supplies to markets in Asia and elsewhere, Tass news agency quoted her as saying.

Russian gas deliveries to Europe through three key pipeline routes were broadly steady overall on Tuesday morning, little changed from Monday evening.

Reuters