Russia and the West quarrel over gas payments in rubles

The valves are photographed at the Atamanskaya compressor station, part of the Gazprom Power of Siberia project outside the far eastern town of Svobodny, in the Amur region, Russia, November 29, 2019. REUTERS/Maxim Shemetov.

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  • Russia to decide on gas payment mechanism by Thursday
  • EU countries are still at odds over how to pay in rubles
  • G7 countries refuse to pay for Russian gas in rubles

(Reuters) – Russia said on Monday it would not supply gas to Europe for free as it worked to find ways to accept payments for its gas exports in rubles, but the G7 nations rejected the request.

At a meeting of EU leaders on Friday, no common position emerged on Russia’s demand last week that “unfriendly” countries should pay in rubles, not euros, for its gas in the wake of the United States and its European allies cooperating in a series of sanctions targeting Russia. Read more

Concerns about the security of supplies are boosted after demand, as companies and European Union countries scramble to understand the fallout.

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The Russian Central Bank, the government and Gazprom (GAZP.MM)which accounts for 40% of European gas imports, must submit its proposals for ruble gas payments to President Vladimir Putin by March 31.

“We will not provide gas for free, this is clear,” Kremlin spokesman Dmitry Peskov said on a conference call. “In our situation, it is not possible and appropriate to engage in charitable work (with European clients).”

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In an interview broadcast later on Monday with US public radio PBS, when asked if gas would be turned off for non-payers, Peskov replied: “No payments – no gas.”

But he added that Russia has not yet made a final decision on how to respond if European countries refuse to pay in Russian currency.

Meanwhile, energy ministers from the Group of Seven industrialized nations have rejected demands for a ruble payment, German Economy and Climate Protection Minister Robert Habeck said after talks with his counterparts. Read more

“All the G7 ministers agreed that this is a unilateral and clear violation of existing contracts,” he told reporters after a virtual conference with G7 energy ministers.

He said that the ministers “emphasized once again that the concluded contracts are valid and companies must respect them…Paying in rubles is not acceptable, and we call on the companies involved not to comply with Putin’s request.”

energy security

Wholesale gas prices in the Netherlands and Britain rose as much as 20% on Monday on concerns about Russian gas supplies.

The European Union aims to reduce its dependence on Russian gas by two thirds this year and end imports of Russian fossil fuels by 2027. Russian gas exports to the European Union amounted to about 155 billion cubic meters last year.

On Friday, the United States said it would supply 15 billion cubic meters of liquefied natural gas to the European Union this year. Read more

US LNG plants are producing at full capacity and analysts say most of any additional US gas sent to Europe should come from exports that would otherwise go elsewhere.

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Russian MP Ivan Abramov said that the G7’s refusal to pay for Russian gas in rubles would lead to an apparent disruption of supplies, according to the RIA news agency.

Abramov is a member of the Committee on Economic Policy of the Federation Council, the upper chamber of the Russian parliament.

Habeck, the president of Germany, called Russia an “unreliable energy supplier”.

In response to a question about what will happen if Russia stops gas deliveries, he added: “We are ready for all scenarios, not just since yesterday.”

However, experts said that the EU will struggle to replace all Russian gas exports in a short period of time. Read more

Data from operators showed shipments of Russian gas to Europe through three major pipelines stable on Monday, with the Yamal-Europe pipeline continuing to flow eastward from Germany to Poland. Read more

Russian Gazprom (GAZP.MM) It said it continues to supply natural gas to Europe via Ukraine in line with the demands of European consumers.

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Reporting by Reuters. Writing by Nina Chestney; Editing by David Evans and Stephen Coates

Our criteria: Thomson Reuters Trust Principles.

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