Moscow said last week it wanted to be paid in rubles, rather than US dollars or euros as stipulated in existing gas supply contracts, and threatened to halt supplies if it didn’t. The Kremlin’s demand was rejected by Germany and the G7 group of leading industrialized countries.
The federal government said on Wednesday the country had enough gas for now, but urged all consumers – from businesses to hospitals to households – to reduce their consumption as much as possible with immediate effect.
“There are currently no delivery bottlenecks,” said Economics Minister Robert Habeck in a statement. “Nevertheless, we must take further precautionary measures to be prepared for a possible escalation by Russia.” The German gas storage facility is currently 25% full, he added.
The “early warning” is the first of three alert levels set out in Germany’s plan for managing gas supplies in a crisis. If the situation worsens, the government would issue an “alert” followed by an “emergency”. In this state of high alert, regulators can ration gas to keep supplies going to “protected customers” like homes and hospitals. Industrial users would be the first to face cuts.
“That means industrial production is lost, supply chains are lost,” Leonhard Birnbaum, CEO of German energy group E.ON (EONGY), told public broadcaster ARD, according to Reuters. “We are certainly talking about very high damage.” Klaus Müller, Head of the German Energy Market Authority, said in a tweet Wednesday’s alert was aimed at avoiding a deterioration in gas supplies but said consumers should be prepared for “all scenarios”.
The European Union depends on Russia for about 40% of its natural gas, and Germany is Moscow’s largest energy customer on the continent. The EU sanctions imposed on Russia for its invasion of Ukraine include a ban on new investments in energy projects, but do not target oil and gas exports.
Habeck said this week that payments in rubles were unacceptable for Berlin and called Russian President Vladimir Putin’s demand “blackmail”.
Putin has given Russia’s central bank and state-owned gas company Gazprom until Thursday to come up with proposals to accept payments in rubles instead of US dollars or euros, as agreed in the supply contracts.
With Russia’s sanctioned central bank banned from swapping euros and dollars for rubles, Moscow is trying to find a new stream of money to spend easily.
Putin could use the ruble to “directly finance the war, the army, the supply of the soldiers, the supply of petrol for the tanks and the construction of weapons in their own country,” Habeck said on Monday.
The European Union plans to cut consumption of Russian natural gas by up to 66% this year as it prepares for a complete break with its single largest energy supplier. But Europe would long survive without Russian gas, and finding alternative sources poses a major logistical challenge. A recession would be all but certain if Putin halted supplies.
Habeck said a crisis team made up of experts from the government, regulatory authorities, gas network operators and the 16 German federal states had been convened to closely monitor the situation and, if necessary, take measures “to increase security of supply”.
– Charles Riley and Chris Stern contributed to the coverage.