- The BDEW group calls on the government to arm itself against disruptions
- Russian demand raises doubts about the historical supply role
- Russian gas is still flowing west
FRANKFURT/LONDON, March 24 – German energy suppliers on Thursday said their country needs an early warning system to tackle gas shortages, a day after Russia ordered contract payments to be switched to rubles, raising the risk of a supply shortage and even higher Prices.
President Vladimir Putin’s ruble payment demand, which IEA Executive Director Fatih Birol called a “security threat,” added to market nervousness and challenged Russia’s historic claim to be a reliable gas supplier regardless of geopolitics.
Putin announced the call Wednesday after the United States and European allies joined forces on a series of sanctions against Russia following last month’s invasion of Ukraine. Continue reading
The European energy sector is already witnessing supply concerns and the reference price for German gas supplies next year has risen 8% since Putin’s comments, having already quadrupled in the past 12 months.
For more than 50 years, Moscow has ensured the supply of Germany, the largest consumer of Russian gas, even during the Cold War. Russia’s main gas exporter, Gazprom (GAZP.MM), has more than 40 long-term agreements with European counterparts. Continue reading
But on Thursday, the German utility association BDEW, which includes Gazprom’s customers RWE (RWEG.DE) and VNG (VNG.UL) of EnBW (EBKG.DE), called on the government to develop an early warning system if Russia cuts supplies .
“There are concrete and serious signs that the gas supply situation is threatening to deteriorate,” said BDEW President Kerstin Andreae, referring to Russia’s request to “unfriendly” countries, including Germany, to pay for gas in rubles. Continue reading
The BDEW said the national energy regulator, the Bundesnetzagentur, must set criteria by which industries and sectors would continue to be supplied while domestic customers would be protected by existing regulations.
Economics Minister Robert Habeck said there was no need for an early warning mechanism and supplies were guaranteed, but added the situation needed to be closely monitored.
DILEMMA
Russia’s demand, which has yet to be backed by a concrete mechanism, poses a dilemma for European customers: refuse to pay in rubles and risk not getting gas, or agree and risk higher prices if contracts be renegotiated and long-term deals are thrown off more cheaply.
“Russia is not turning off the gas tap (yet). But it could significantly increase the price we pay for it,” said Commerzbank analysts.
A compressor station owned by RWE is pictured in the western town of Huenxe January 7, 2009. REUTERS/Ina Fassbender/File Photo
Asked whether the United States would allow European nations that cannot do without Russian gas to settle payments in rubles without engaging in sanctions violations, a White House official said Washington was consulting with its allies.
European Commission President Ursula von der Leyen agreed, saying the move was an attempt to circumvent EU sanctions on Russia. “We will not allow our sanctions to be circumvented. The time when energy could be used to blackmail us is over,” she said. Continue reading
Japan, the largest importer of Russian LNG in Asia, said it was unclear how the ruble swap would work. Continue reading
Tokyo Gas (9531.T) and Osaka Gas (9532.T), the country’s two largest local gas suppliers, said they are investigating details of ruble needs, echoing comments made by Germany’s VNG and other European buyers of Russian pipeline gas.
South Korea, Asia’s third-largest importer of Russian LNG, expects imports to continue, with the country’s Financial Services Commission saying it will do whatever is necessary to facilitate trade.
Russian gas supply concerns underpin Asia’s spot LNG prices and Europe’s gas price benchmark
In Poland, Pawel Majewski, CEO of PGNiG (PGN.WA), said the company, which has a contract with Gazprom until the end of this year, cannot simply switch to paying in rubles.
“Our contractor cannot freely change the payment method specified in the contract,” he said.
Danish energy giant Orsted (ORSTED.CO), which also has a long-term take-or-pay deal with Gazprom, said the likely impact of the move is unclear.
RWE and Uniper (UN01.DE), Germany’s largest Gazprom customer, did not immediately comment on Thursday, while Spanish company Naturgy, which has a contract with Yamal LNG, also declined to comment.
A senior Italian economic adviser said on Wednesday the country would continue to pay in euros.
Russian gas will continue to flow for the time being.
Gas shipments west to Europe through the Nord Stream 1 Baltic Sea pipeline rose slightly on Thursday, while the Yamal-Europe pipeline flowed east from Germany to Poland.
Reporting by Vera Eckert and Christoph Steitz in Frankfurt; Stine Jacobsen in Copenhagen; Marwa Rashad, Nina Chestney and Noah Browning in London; Marek Strzelecki in Warsaw; Valentina Za in Milan; Tom Käckenhoff in Dusseldorf; Yuka Obayashi, Kantaro Komiya and Ritsuko Shimizu in Tokyo; Heekyong Yang and Joori Roh in Seoul; Jeanny Kao in Taipei; Isla Binnie in Madrid; Arathy Somasekhar in Houston; Trevor Hunnicutt in Washington Edited by Barbara Lewis and Matthew Lewis