The EU’s determination to reduce its gas reliance on Russia, its drive to increase LNG imports, and Putin’s ruble-for-gas demand could result in Russian state gas giant Gazprom losing about one-third of its typical gas export volumes to Europe this year, analysts told Reuters on Friday.
Gazprom’s natural gas sales to Europe this year could drop by 40 billion-45 billion cubic meters (bcm) from around 150 bcm in 2021, Sergei Kapitonov at the Energy Centre at Moscow’s Skolkovo School of Management told Reuters.
According to Rystad Energy’s head of gas market research, Sindre Knutsson, Russian gas exports could be even lower as the EU looks to displace as much Russian gas as soon as possible, while Russia could cut supply over possible disagreements over the ruble-for-gas scheme. Moreover, the Russian war in Ukraine could also disrupt pipeline gas transit through Ukraine if any infrastructure is damaged or hit, Knutsson added.
Last month, Vladimir Putin said that “unfriendly” nations should pay in rubles for natural gas.
Russia had set a March 31 deadline for the countries it considers “hostile”—including the United States, all EU member states, Switzerland, Canada, Norway, South Korea, Japan, and many others—to start paying in rubles for natural gas.
The EU has rejected Putin’s demands for payments in rubles. Still, Russia did not immediately cut off the gas supply to Europe after April 1, partly because it is dependent on revenues from gas and partly because payments for gas delivered after April 1 are not due until later this month or early May.
Some of Russia’s gas customers have agreed to pay in rubles for Russian gas, Deputy Prime Minister Alexander Novak said last week. The Russian official, however, did not disclose which buyers had agreed to the rubles payment.
In the EU, Hungary—whose Prime Minister Viktor Orban has been in close ties with Putin for a decade—said earlier this month that it was ready to pay in rubles for Russian gas. Hungary has broken ranks with the EU by stating it was prepared to pay for Russian gas with rubles, despite the EU’s attempt to present a unified front in the face of Putin’s demands for rubles for Russian gas.
By Tsvetana Paraskova for Oilprice.com
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Still, Russia’s gas revenue wouldn’t be affected because gas prices would rise by more than a third thus compensating it for a loss of one third of its gas exports.
Moreover, President Putin will soon get his wish to be paid for his gas exports in ruble. The alternative will be plunging the EU deeper in the energy crisis which has been enveloping it since early 2021.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London