By March 31, Russia intends to determine the payment terms for the supply of oil and gas. The G7 energy ministers decided that the required payment in rubles for Russian energy supplies was unacceptable. A German embargo would cause gross domestic product to collapse by as much as 3%.
4:23 pm, March 29, 2022
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In the future, Moscow will only accept rubles as payment for gas deliveries © AP
Russia wants to set conditions for payment for gas and oil supplies by Thursday. “Companies must take into account the changing conditions of the structure and the completely new situation that has arisen as a result of the economic war against Russia,” said Presidential Office spokesman Dmitry Peskov, referring to Western sanctions. He reiterated that foreign buyers of fossil fuels would have to pay in rubles. He emphasizes that Russia will not export its gas for free.
Last week, Russian President Vladimir Putin announced that that in the future Moscow will only accept rubles as payment for gas deliveries to “hostile” countries – above all EU countries. However, G7 energy ministers agreed that the required payment in rubles for Russian energy supplies was unacceptable.
German GDP drops by up to 3%
The German Institute of Economics (DIW) has calculated that a German embargo on oil, gas or coal or a Russian interruption in the supply of these raw materials would cause Germany’s gross domestic product to collapse by up to 3% in the medium term. If the economy had to permanently adapt to no longer buying oil and gas from Russia, According to calculations, the corresponding conversion would take up to ten years, DIW announced on Tuesday.
Wholesale gas prices remain at record levels. The Austrian gas price index (ÖGPI) for April was up another 6.5% from a month earlier, and from a high level.
The Industry Federation also complains about sharp price increases and “massive impact” for farms. The social partners await feedback from the federal government on the package of demands presented last week to contain inflation.
Economic output would fall by as much as three percent over the next 18 months. “At the same time, an import ban would lead to an increase in inflation of up to 2.3 percentage points,” he said. The model also takes into account the interactions between euro countries and private consumption.
“Potential to Destabilize the Russian Economy”
An embargo or a delivery stop would also have far-reaching consequences for Russia, write the researchers. “Even if Russia continues to be able to sell some of its primary energy sources to third countries such as China, it can be assumed that this will only be possible with significant price discounts.”
The German energy company E.ON wants to bring green hydrogen to Germany and Europe on a large scale with its new Australian partner FFI. Both companies have partnered with the aim of finding ways to deliver up to 5 million tonnes of green hydrogen a year to Europe by 2030, as they announced in Berlin on Tuesday.
Hydrogen plays a central role in the Berlin government’s plans for an energy transition in Germany. “The race to produce and transport green hydrogen on a large scale has picked up speed,” said German Economy Minister Robert Habeck (Greens): “The agreement between E.ON and FFI is an important step.” Green hydrogen is considered an important building block for the decarbonization of the industry. Plastics maker Covestro announced in January that it wanted to buy green hydrogen from Australia.
So having an energy import stop “the potential to destabilize the Russian economy and pressure the Russian government to end its war of annihilation against Ukraine.”
The German government is currently rejecting an embargo. On Sunday, Chancellor Olaf Scholz made it clear again in “Anne Will” that that, from the government’s point of view, entire branches of industry in Germany would be threatened in such a case.