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Home›Serbian banks›German gas buyers sound alarm over Russian demand for rubles

German gas buyers sound alarm over Russian demand for rubles

By Corey Owens
March 24, 2022
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Reuters

Vera Eckert and Christoph Steitz

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FRANKFURT — German utilities said on Thursday their country needs an early warning system to deal with gas shortages, a day after Russia ordered the switch of contract payments to rubles, which could reduce supplies and intrigue buyers about the consequences.

President Vladimir Putin’s demand for ruble payment has added to market jitters and challenges Russia’s historic claim that it is a reliable gas supplier, regardless of geopolitics.

For more than 50 years, Moscow has ensured supplies to Germany, even during the Cold War, and its main gas exporter Gazprom has more than 40 long-term gas deals with European counterparts.

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But on Thursday, Germany’s utility association BDEW, which counts Gazprom customers RWE and VNG of EnBW among its members, urged the government to design an early warning system in case Russia halts supplies.

“There are concrete and serious indications that the gas supply situation is about to deteriorate,” BDEW chairwoman Kerstin Andreae said, citing Russia’s request to “unfriendly” countries. including Germany, to pay for gas in rubles.

BDEW said the national energy regulator, the Bundesnetzagentur, must establish criteria by which industries and sectors would continue to be supplied, while residential customers would be protected by existing regulations.

German Economy Minister Robert Habeck said an early warning mechanism was not needed and supply was guaranteed, but added the situation needed to be monitored.

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Russia’s request, which has yet to be backed by a concrete mechanism, has left gas customers puzzled over the implications, with Japan, the biggest importer of Russian LNG in Asia, saying it was unclear how. ruble change would work.

Tokyo Gas and Osaka Gas, the country’s two largest local gas suppliers, said they were studying the details of the ruble requirement, echoing similar remarks from Germany’s VNG and other European gas buyers. Russian gas pipeline.

South Korea, Asia’s third-largest importer of Russian LNG, expects to be able to continue imports, with the country’s Financial Services Commission saying it will do whatever is necessary to facilitate trade.

In Poland, Pawel Majewski, CEO of PGNiG, said the company – which has a contract with Gazprom until the end of this year – could not simply switch to paying in roubles.

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“Our contractual partner cannot freely change the payment method stipulated in the contract,” he said.

Danish energy giant Orsted, which also has a long-term contract with Gazprom, said the likely impact of the move was unclear.

RWE and Uniper, Gazprom’s biggest German customer, had no immediate comment on Thursday.

A top Italian economic adviser said on Wednesday that the country would continue to pay in euros.

“Payment in rubles should in principle be possible without violating sanctions as long as certain commercial banks are excluded from sanctions,” Commerzbank said in a research note.

“But it now has to be renegotiated, and the prospect of worse terms forced rewrites of long-term gas contracts is pushing prices up.”

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Putting in place an early emergency trigger would require cooperation between municipalities, grid operators and the regulator, BDEW said, implying that the government would need to oversee the effort.

The parties would identify bottlenecks and help preserve customer prioritization, said BDEW, which represents 1,900 gas, electricity and water operators in Europe’s biggest economy.

Half of Germany’s 41.5 million households depend on natural gas for heating, while industry accounted for a third of the 100 billion cubic meters of national demand in 2021. The country is the biggest consumer of Russian gas.

Across Europe, the energy sector is already experiencing supply problems and soaring gas and electricity prices.

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Deliveries of Russian gas west to Europe via the Nord Stream 1 pipeline across the Baltic Sea rose slightly on Thursday, while the Yamal-Europe pipeline flowed east from Germany to Poland .

The Kremlin says Serbia’s concerns over ruble gas payments are a priority after the Serbian president, a Russian ally, said EU member Bulgaria must continue to supply it with gas Russian.

(Reporting by Vera Eckert and Christoph Steitz in Frankfurt, Stine Jacobsen in Copenhagen, Marwa Rashad and Nina Chestney in London, Marek Strzelecki in Warsaw, Valentina Za in Milan, Tom Kaeckenhoff in Düsseldorf, Yuka Obayashi, Kantaro Komiya and Ritsuko Shimizu in Tokyo, Heekyong Yang and Joori Roh in Seoul, Jeanny Kao in Taipei and Arathy Somasekhar in Houston; Editing by Miranda Murray, Jason Neely, Emelia Sithole-Matarise and Barbara Lewis)

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