Standoff: G7 Rejects Putin’s Demand for Gas Payments in Rubles; Russia Warns ‘No Payment, No Gas’

A liquefied natural gas (LNG) tanker berthed in Scotland last week. Concern is mounting over gas and oil supplies and energy security due to the conflict between Russia and the Ukraine. (Photo by Ken Jack/Getty Images)

A liquefied natural gas (LNG) tanker berthed in Scotland last week. Concern is mounting over gas and oil supplies and energy security due to the conflict between Russia and the Ukraine. (Photo by Ken Jack/Getty Images)

(CNSNews.com) – A standoff between Russia and the world’s leading democratic economies looms large, as the G7 refuses to accede to Moscow’s demand that Europe pay for Russian natural gas in rubles, and Russia counters that it is not going to send its gas to Europe for free.

President Vladimir Putin announced last Wednesday that Russia henceforth will only accept payment in rubles for its gas supplies to “unfriendly” countries.

The move serves the dual purpose of strengthening the ruble, whose value plummeted after sanctions were imposed on Russia following Putin’s invasion of Ukraine, and of pressuring European governments reliant on Russian energy supplies to undercut their own sanctions.

But the G7 pushed back on Monday. After a video conference meeting, the group’s energy ministers said they “rejected Putin’s demand that gas deliveries must be paid in rubles, and reaffirmed that agreed contracts for gas deliveries must be respected, since most of the gas supply contracts explicitly stipulate payment in euros or dollars.”

“The G7 partners therefore agreed to call on the companies based in their countries not to accede to such demands.”

German Economy Minister Robert Habeck, who chaired the meeting, said afterwards Moscow’s demand for payment in rubles rather than in the agreed-upon currency constituted a “unilateral and clear breach” of existing contracts.

“That means that a payment in rubles is not acceptable and we urge the relevant companies not to comply with Putin’s demand,” he said. The G7 comprises the United States, Britain, Canada, France, Italy, Japan, and Germany, which holds the rotating presidency this year.

The G7 decision was a unanimous one, despite significant differences in their situations. In contrast to U.S. and Canada, Europe relies on Russia for about 40 percent of its gas needs and faces an uphill battle as it looks to wean itself off Russian energy supplies. (The remaining G7 member, Japan, obtained about nine percent of its liquefied natural gas from Russia last year.)

Habeck said Putin was obviously trying to drive a wedge between members of the group.

“But you can see that we won’t allow ourselves to be divided,” he said. “And the answer from the G7 is clear – the contracts will be honored.”

Putin earlier ordered state-owned Gazprom, government officials, and Russia’s central bank to prepare the documentation to switch the payments to rubles and report to him by March 31.

In Moscow, the TASS state news agency said Kremlin spokesman Dmitry Peskov declined to lay out how Russia would respond if European customers refused to for the gas in rubles.

“But we will definitely not supply gas for free, that’s for sure,” it quoted him as saying. “It is hardly possible and reasonable to engage in charity in our situation.”

In an interview later with PBS, Peskov was asked if Russia would shut off the gas if Europe refused to pay in rubles.

“I don’t know what is going to happen when they reject this possibility,” he said. “As soon as we have the final decision we’ll look what can be done.”

“But definitely we are not going to make a charity out of that, and to send gas free of charge to western Europe,” he added.

Asked again if Russia would turn off the gas under those circumstances, Peskov replied, “Well it depends – no payment, no gas.”

 

‘Every supply contract that is terminated harms Putin’

During his visit to Brussels last week, President Biden announced with European Commission president Ursula von der Leyen the formation of a joint taskforce to reduce the E.U.’s dependence on Russian fossil fuels.

A worker tightens a valve on a pipeline in western Ukraine that pipes Russian natural gas to western Europe. (Photo by Alexander Zobin/AFP via Getty Images)

A worker tightens a valve on a pipeline in western Ukraine that pipes Russian natural gas to western Europe. (Photo by Alexander Zobin/AFP via Getty Images)

The U.S. and “international partners” aim to provide at least 15 billion cubic meters (bcm) of LNG to Europe this year, with more in the future, while the taskforce also works on reducing overall gas demand, and Europe commits to building additional LNG import, storage and distribution infrastructure.

With the E.U. aiming to achieve independence from Russian energy supplies by “well before the end of the decade,” the E.U. will work to ensure the stable demand for 50 bcm of LNG from the U.S., annually, until at least 2030.

“So we’re going to have to make sure the families in Europe can get through this winter and the next while we’re building an infrastructure for a diversified, resilient, and clean energy future,” Biden said at their meeting.

Russia’s ambassador to the E.U., Vladimir Chizhov, told state television on Monday that European customers will have no choice but to pay for Russian gas in rubles, since the amount of LNG the U.S. is evidently able to provide is only about ten percent of the amount of natural gas that E.U. member-states get from Russia via pipeline now.

While the E.U. aims to be independent of Russian oil and gas by around 2027 Germany, the bloc’s largest economy, has announced more ambitious plans.

Germany obtained between 50 and 75 percent of its gas imports from Russia in the first half of 2021, but in a statement late last week Habeck said the federal government is working to ensure that Germany becomes “largely independent of Russian gas by mid-2024.”

Habeck said steps being taken now not to renew expiring contracts with Russian suppliers could see imports of Russian oil halved by the middle of the year, and imports of coal drop from 50 percent to around 25 percent in the next few weeks.

He said that although the economic and social consequences of a complete embargo of Russian energy would be too serious for Germany to take that step right now, “every supply contract that is terminated harms Putin.”

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