Rubles rocked the gas world
For a whole month western politicians, experts and observers practised verbal gymnastics concerning refusal from Russian gas imports
Different timelines and trajectories were mentioned, the International Energy Agency prepared a report on the prospects of this process, the provisions of which then formed the basis of the European Commission’s operational plan to overcome the so-called dependence on our gas. However, it was widely acknowledged that the EU cannot quickly turn away from Russian supplies, which provide more than a third of the EU’s natural gas needs and about 10% of its energy needs. Therefore, the sanctions were imposed in order to circumvent gas supplies from Russia and their maintenance.
Nevertheless, Ursula von der Leyen, the chairman of the European Commission, stated at a press conference after the informal EU summit in Versailles on March 11 that “by mid-May we will propose doing away with Russian gas, oil and coal by 2027”. Other politicians from many EU countries echoed her, including key importers of Russian gas such as Germany, France and Italy, all of whom have long-term contracts with Uniper, Engie and Eni that run until 2035.
In fact, it was a statement of intent to break the contracts after it had become relatively painless for the European economy and European consumers. Given the scale of the Western sanctions leap we have seen in recent weeks, these threats do not look like empty words or a bluff. Even respect for property rights is no longer sacred in the European legal system, let alone any gas contracts, which are a bone in the throat for the energy ideologists of the future.
And so on 23 March in anticipation of another EU summit, where energy issues and interaction with Russia were to be discussed again, President Vladimir Putin announces the decision to transfer payment by hostile countries for gas under long term contracts to Russian roubles. The government is instructed to prepare relevant directives for Gazprom’s board of directors and the Central Bank is instructed to work with the cabinet to ensure that European buyers of Russian gas can buy roubles and make payments for it in Russia’s national currency. The statement had a bombshell effect. Gas prices soared by 15-20% on the spot. European buyers, despite the warming weather, increased their bids for Russian gas imports by 10%. And EU politicians suddenly remembered that they had long-term contracts with Gazprom, which had to be fulfilled. And because these contracts now stipulate payments in euros or dollars, they cannot switch to paying in roubles. For example, French President Emmanuel Macron has said that the requirement to pay in roubles does not comply with the terms of the contracts: “Russian gas must be paid for in the currency agreed in the contracts.
We are talking about the euro.” “We still assume that the contracts that have been concluded provide for payment in euros or dollars,” Chancellor Olaf Scholz echoed him more gently. “I confirm what I said yesterday: it is considered a violation of contracts that only provide for payment in euros and dollars. The (European) Commission will now look at the legal aspects,” Italian Prime Minister Mario Draghi joined the concert, noting, however, that they “do not expect a reduction in supplies”. The European Commission didn’t have to ask itself twice, but was more forthright. Ursula von der Leyen called payments for gas in Russian currency unacceptable because such payments would violate the EU’s anti-Russian restrictions, not because of any contractual provisions.
The fact is that the EC is very good at pushing through changes to long-term gas supply contracts. Over the last 20 years, it has been pushing Russia’s Gazprom and other gas exporters repeatedly on the grounds that contract provisions do not comply with the new European legislation.
For example, the clause forbidding the resale of gas to other countries has disappeared from the contracts. Other changes followed, up to and including a major adjustment of key supply conditions, de-linking from oil and switching to spot pricing. Therefore, there is nothing extraordinary about Gazprom asking its counterparties to change the currency of payment due to the prohibition by Russian regulators to accept payment in dollars or euros. Only that it is instructed to do so in a short period of time – by the end of March. But the situation is unusual now, hypersanctioned, so it would be naïve for Europe to believe that the Russian Federation would not defend itself and allow itself to prepare quietly for rejection of Russian gas.
By and large, European buyers have two options. Agree with the demands of the Russian regulators and pay for gas in roubles or face what they have been trying to avoid for the last month – a real, not futures, gas crisis. They have time to think about this dilemma. But not much.
Alexei Grivach, Izvestia newspaper