Germany, the largest economy in Europe, activated an emergency contingency plan on the management of natural gas supply on March 30th in order to avoid a predicament or suspension in provision from Russia’s demand of paying for fuels with Ruble. Judging by Vladimir Putin’s latest plan, Germany may proceed with the particular implementation.
Putin announced on March 31st that foreign buyers must pay for Russia’s natural gas with Ruble starting from April 1st, otherwise the provision of gas will decrease as a result. Various capital cities in Europe have refused to abide by this new regulation, and Germany has even called it “extortion”.
According to the new regulation issued by Putin, foreign buyers are able to pay for natural gas through a designated account at Gazprombank as the bank is not sanctioned by Western countries. Gazprombank will purchase Ruble on behalf of natural gas buyers, and transfer the Ruble to another account.
Reuters had previously covered that the EU is prepared to execute additional sanctions on the Kremlin, which will depend on Moscow’s standpoint in paying natural gas with Ruble, thus it is uncertain whether the EU would enforce stricter sanctions this time.
The European Commission pointed out on March 30th that it will be most ready for any natural gas shortages by working closely with each member country, and also proposed legislation that asks each country to fill up their natural gas level to at least 80% before November, which is almost impossible without the gas supply of Russia.
It is currently uncertain whether there are other methods for foreign businesses to continue with their payment without using Ruble, with the particular possibility overturned by the EU and G7.
Italy is currently contacting other European partners so as to enforce adamancy towards Russia and ensure unimpeded economic activities from its own natural gas reserve even under subsequent scission.
German energy companies are in close meetings with the German government on discussing the corresponding measures for the possible supply scission, as well as stipulating road maps subsequent to the cut-off of natural gas exports.
Robert Habeck, Federal Minister for Economic Affairs and Climate Action, has executed the “early warning phase” of the natural gas emergency contingency plan, where the ministry, regulatory authorities, and crisis teams of private sectors would monitor the import and reserve volume of natural gas. Habeck commented that Germany’s current supply of natural gas remains guaranteed, though he also urged consumers and businesses to lower their consumption.
Half of the 41.5 million households in Germany utilize natural gas to stay warm, while industrial applications occupy 1/3 of national demand, with Russia being the largest supplying country at 40% of import during Q1 this year. Habeck pointed out that Berlin has promised to terminate dependency on Moscow’s energy, however, the promise can only come to fruition in mid-2024.
(Cover photo source: Unsplash)