European countries are preparing for an emergency scenario in which natural gas exports from Russia will be stopped as early as this weekend, following the confrontation with Russia over the currency in which they will pay for it. Germany announced today (Wednesday) that it has raised the alert in its emergency scenario to maintain energy security to the first level. At the third level of the scenario, quantities of gas will be allocated to factories and heavy industry.
The background to the move is last Thursday’s announcement by Russian President Vladimir Putin that he has allocated a week to the Russian central bank to demand the transfer of Europe’s replica payments for natural gas from dollars or euros to rubles. The move is intended to support the exchange rate of the Russian currency, and the existing sanctions on the activity of the bank’s foreign currency, and the ruble did indeed rise by 15% against the dollar after the announcement. It is estimated that the EU transfers between 500 and 700 million euros daily to Russia, but the Russian central bank is limited in its ability to convert them into rubles due to international sanctions.
In response, the 7G countries, which include Italy and Germany, which are the largest importers of natural gas in the union, announced on Tuesday that they were refusing Russian demand. German Economy Minister Robert Hubbeck said the demand for payment in rubles constituted a “clear violation of existing contracts” and that there was no intention to comply with President Putin’s demand. The European Union, which is also a partner in the Forum of Developed Economies, has announced that it will sweepingly adopt the refusal to switch to paying in rubles.
Kremlin spokesman Demetrius Peskov threatened in response in an interview with American television to stop gas exports immediately. He said Russia was waiting for an official response from the “unfriendly countries” – a blacklist prepared by Russia that includes more than 50 countries that have joined sanctions against it – and will then decide how to act. “No payment – no gas,” Peskov clarified, adding that Russia will not export the resource “for charity.”
Now the ball is in the Russian court, and in Europe they are waiting for Putin’s announcement regarding the continued export of gas, which is expected to be received on Thursday or Friday at the latest, according to the mainland media. The reaction may include an immediate cessation of gas flow to the west.
The implications of halting Russian gas imports for European economies could be dramatic. Although there are some repositories that exist, the level in them is not enough to support activity over time. German residents, for example, may no longer need gas for heating after mid-April, but Germany’s extensive chemical industry depends on it. A spokesman for the Association of Companies of this industry said this week that the consequences of halting gas imports from Russia could include “layoffs of hundreds of thousands of workers” and disruption in all of Europe’s large-scale production and industry mechanisms.
The dust itself said in an interview about two weeks ago that stopping gas imports from Russia, a move that Germany has so far deliberately refused to take, would involve a recession, a wave of bankruptcies and even increased poverty in the country. Even before the Russian decision, the German Council of Economists this week cut its estimates for growth in the German economy in 2022 – from 4.1% to only 1.8%.
The dust assured the country’s media that “we are prepared for any situation,” but there is doubt about Germany’s ability to make up for the shortage of Russian gas, if any. The European Commission has called on member states to prepare their “emergency scenarios” in the event of a gas outage. As mentioned, Germany announced today that it is on “preliminary alert” to stop the gas supply from Russia, which means setting up an emergency team that will monitor the situation and ensure energy security for the coming weeks. In the third phase of the emergency plan, a gas allocation will be made to various plants and sectors as decided by the German government.