Rubles, rather than euros or dollars. Vladimir Putin wants to invoice Gazprom’s Russian gas with his country’s currency, and no longer with European or American currencies. The Russian president asked the Russian Central Bank and the company to submit a report on the matter to him on Thursday, March 31, with a double objective in mind: to force companies to buy rubles on international markets, in order to raise its course, and demonstrate its political power in the face of European sanctions. “If you want gas, find rubles”summarized (in Russian) Vyacheslav Volodin, the speaker of the Duma.
Very concretely, this injunction means that European countries must, according to him, buy Russian currencies from banks spared from their own sanctions, which will serve as exchange banks. Certainly, “the cost of transactions will be higher”notes Ludovic Subran, chief economist at Allianz, but the message is above all political: “This coup by Vladimir Putin would allow him to demonstrate that the ruble is still a convertible currency.” Never short of ideas, Viatcheslav Volodin would like to apply this logic to other products (fertilizers, cereals, coal, metals, wood, etc.). And the Kremlin did not reject these options.
To do this, in theory, trade agreements would have to be renegotiated. “Our contracts provide for payment of the gas in euros. There is no clause that allows the seller to change currency”Jean-Pierre Clamadieu, the president of Engie, recently insisted on franceinfo. “I understand that this group is stressed at the momentcomments Thierry Bros, energy specialist and professor at Sciences Po. The companies, within the framework of their licenses, have the obligation to be able to supply gas. Same reactions from the Italian Eni or the Austrian OMV. But the legality of this measure could however take a back seat, behind Moscow’s will and the lack of alternatives.
So politics took over. And the G7 countries (Germany, Canada, United States, France, Italy, Japan, United Kingdom) seem determined to engage in a standoff. “All the ministers agree that this is a unilateral and clear breach of existing contracts”, German Economy Minister Robert Habeck said on Monday. European companies would have “could negotiate this request with Gazprom, for example by asking for a price halved”believes Thierry Bros.
To date, the EU and the G7 have ruled out any embargo on this gas, as Europe’s dependence is great. The paradox is striking today. While the Russian economy has been drowned in sanctions since the beginning of the war, imports of its gas have increased throughout the period, and this “in order to build up stocks”explains Ludovic Subran, economist at Allianz, contacted by franceinfo.
“Europe is now paying $750 million a day.”
Ludovic Subran, economistat franceinfo
Ukraine therefore accuses its Western partners of financing the war waged by Vladimir Putin. During a videoconference speech before the Norwegian Parliament, Ukrainian President Volodymyr Zelensky urged the Nordic country to produce more natural gas, in order to reduce European dependence on Russia.
This rise in orders is partly due to fears about future gas supplies and badly adjusted orders before the war. But the phenomenon is also cyclical, because the gas industry traditionally begins its re-storage in the spring, in order to prepare for the following winter. “After going down to 28%, the storage level is currently going up, with a goal of reaching 80%, even 90%, if possible”completes Thierry Bros.
Time is running out before finding fallback solutions. “About 75% of Russian gas supplies are replaceable by other more expensive supplies”, explains Thierry Bros. But ultimately, a quarter of imported Russian gas cannot be replaced, according to the expert’s estimates, ie 10% of total European demand. Moreover, the Energy Regulation Commission already recommends that the French save energy, in anticipation of next winter.
The Kremlin, for its part, has already warned that Russia “will not provide free gas” and that the period is not conducive to any “pan-european charity”.
“Russia must find a way to ensure that the payments take place and that [l’exigence de paiement en roubles] not become an excuse for Europe not to pay.”
Ludovic Subran, economistat franceinfo
By refusing to cash in payments in euros or dollars, and deciding to cut the floodgates, it would also risk exposing itself to legal action before the Stockholm Arbitration Court, which settles international trade disputes. “The damages can then amount to hundreds of billions of dollars., explains Thierry Bros.
On Wednesday, the Kremlin announced that this measure would be implemented gradually, without actually setting a date. During a conversation with German Chancellor Olaf Scholz, Vladimir Putin wanted to spare his interlocutor and big client. “Payment for Russian gas in rubles must not deteriorate the contracts of European customers“assured him the Russian autocrat.