May 29, 2022
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Putin wants ‘unfriendly’ countries to pay for Russian gas in roubles

LONDON — Russia will search fee in roubles for gas offered to “unfriendly” countries, President Vladimir Putin stated on Wednesday, and European gas costs soared on considerations the transfer would exacerbate the area’s power crunch.

European nations and america have imposed heavy sanctions on Russia since Moscow despatched troops into Ukraine on Feb. 24. However Europe relies upon closely on Russian gas for heating and energy era, and the European Union (EU) is break up on whether or not to sanction Russia’s power sector.

Mr. Putin’s message was clear: If you’d like our gas, purchase our foreign money. It remained unclear whether or not Russia has the ability to unilaterally change present contracts agreed upon in euros.

The rouble briefly leapt after the shock announcement to a three-week excessive previous 95 in opposition to the greenback. It pared positive factors however stayed nicely under 100, closing at 97.7 in opposition to the greenback, down by greater than 22% since Feb. 24.

Some European wholesale gas costs have been up to 30% larger on Wednesday. British and Dutch wholesale gas costs jumped.

Russian gas accounts for about 40% of Europe’s complete consumption. EU gas imports from Russia this yr have fluctuated by 200 million to 800 million euros ($880 million) a day.

“Russia will continue, of course, to supply natural gas in accordance with volumes and prices… fixed in previously concluded contracts,” Mr. Putin stated at a televised assembly with authorities ministers.

“The changes will only affect the currency of payment, which will be changed to Russian roubles,” he stated.

German Financial system Minister Robert Habeck known as Mr. Putin’s demand a breach of contract and different consumers of Russian gas echoed the purpose.

“This would constitute a breach to payment rules included in the current contracts,” stated a senior Polish authorities supply, including Poland has no intention of signing new contracts with Gazprom after their present deal expires on the finish of this yr.

Main banks are reluctant to commerce in Russian property, additional complicating Mr. Putin’s demand.

A spokesperson for Dutch gas provider Eneco, which buys 15% of its gas from Russian gas big Gazprom’s German subsidiary Wingas GmbH, stated it had a long-term contract denominated in euros.

“I can’t imagine we will agree to change the terms of that.”

In accordance to Gazprom, 58% of its gross sales of pure gas to Europe and different countries as of Jan. 27 have been settled in euros. US {dollars} accounted for about 39% of product sales and sterling for about 3%. Commodi-ties traded worldwide are largely transacted in the US greenback or the euro, which make up roughly 80% of worldwide foreign money reserves.

“There is no danger for the (gas) supply, we have checked, there is a financial counterparty in Bulgaria that can realize the transaction also in roubles,” Power Minister Alexander Nikolov instructed reporters in Sofia. “We expect all kinds of actions on the verge of the unusual but this scenario has been discussed, so there is no risk for the payments under the existing contract.”

A number of corporations, together with oil and gas majors Eni, Shell and BP, RWE and Uniper — Germany’s greatest importer of Russian gas — declined to remark.

“It is unclear how easy it would be for European clients to switch their payments to roubles given the scale of these purchases,” stated Leon Izbicki, affiliate at consultancy Power Features. He stated, nonetheless, that Russia’s central financial institution might present extra liquidity to international trade markets that might allow European shoppers and banks to receive wanted roubles.

Moscow calls its actions in Ukraine a “special military operation.” Ukraine and Western allies name this a baseless pretext.

ONE-WEEK DEADLINE

Mr. Putin stated the federal government and central financial institution had one week to provide you with an answer on transferring operations into the Russian foreign money and that Gazprom could be ordered to make the corresponding adjustments to contracts.

In gas markets on Wednesday, eastbound gas flows by way of the Yamal-Europe pipeline from Germany to Poland declined sharply, information from the Gascade pipeline operator confirmed.

“The measures taken by Russia may also be interpreted as provocative and may increase the possibility that Western nations tighten sanctions on Russian energy,” stated Liam Peach, rising Europe econo-mist at Capital Economics.

The European Fee has stated it plans to lower EU dependency on Russian gas by two-thirds this yr and finish its reliance on Russian provides “well before 2030.”

However not like america and Britain, EU states haven’t sanctioned Russia’s power sector. The Fee, the 27-country EU’s government, didn’t reply to a request for remark.

Mr. Habeck stated he would focus on with European companions a potential reply to Moscow’s announcement. Dutch Prime Minister Mark Rutte stated extra time was wanted to make clear Russia’s demand.

“In their contracts it’s usually specified in what currency it has to be paid, so it’s not something you can change just like that,” Mr. Rutte stated throughout a debate with parliament.

Russia has drawn up a listing of “unfriendly” countries corresponding to those who have imposed sanctions. Offers with firms and people from these countries have to be authorized by a authorities com-mission.

The countries embody america, European Union member states, Britain, Japan, Canada, Norway, Singapore, South Korea, Switzerland and Ukraine. Some, together with america and Norway, don’t buy Russian gas.

The USA is consulting with allies on the problem and every nation will make its personal determination, a White Home official instructed Reuters. The USA has already banned imports of Russian power. — Reuters

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