On Thursday (31/3/2022), Russia said it would draw up practical arrangements for foreign companies to pay for their gas in rubles.
This further triggers anxiety because it could increase the possibility of disruption of gas supply to Europe. The reason is, Western countries have so far refused Moscow's request for a transfer of currency to the ruble.
President Vladimir Putin's order last week to charge "unfriendly" countries in rubles as a form of payment for Russian gas has pushed the currency up after falling to all-time lows. Western countries imposed massive sanctions against Moscow for its invasion of Ukraine.
"No one will supply gas for free, that's impossible, and you can only pay for it in rubles," Kremlin spokesman Dmitry Peskov told reporters on Tuesday.
The TASS news agency reported that the Speaker of the Upper House of the Russian Parliament, Valentina Matviyenko, said Moscow was ready if Europe refused to buy Russian energy and could shift its purchases to Asian markets.
European countries, which mostly pay in euros, say Russia has no right to reset contracts. The G7 group of countries rejected Moscow's demands this week.
This week, European wholesale gas prices have increased amid concerns that Russian gas supplies will stop, even though Russia has so far fulfilled its contractual obligations for gas sales to Europe.
Peskov said, in line with the March 31 deadline set by Putin for the payment of rubles, all modalities are being developed so that the system is simple, understandable and feasible for European and international buyers.
The G7 countries urged companies not to agree to ruble payments and said most supply contracts set either the euro or the dollar.
"That is a position we share," a European Commission spokesman said at a news conference in Brussels on Tuesday.
The European Commission said last week it was assessing scenarios that include a complete shutdown of Russian gas supplies next winter, as part of contingency planning for supply shocks.
Impact if Europe doesn't pay in rubles
Reuters data shows that Europe receives about 40% of its gas from Russia. Gas imports reached around 155 billion cubic meters (bcm) last year.
Putin's request has sparked concern in Germany. Moreover, Europe's main economy relies heavily on Russian gas. Many have wondered about the potential disruption and its impact on industry and households if the state failed to pay in rubles.
"Without Russian supplies, the German economy is facing major damage, which should be avoided if possible," E.ON Chief Executive Leonhard Birnbaum told German television. He added that it took the country three years to become independent of Russian gas.
In the event of a breakdown, he said Germany's gas grid regulator would prioritize heating for homes over industrial use, so energy-hungry producers such as steelmakers would bear the initial brunt of any supply cuts.
Data from European Gas Infrastructure shows EU gas storage sites are now 26% occupied, highlighting the challenges of replacing Russia as an energy provider.
The European Commission has proposed a law requiring EU countries to fill deposits at least 80% this year.
Markus Krebber, CEO of Germany's largest utility RWE and a customer of Gazprom, said Germany could only cope with a complete halt to Russian gas imports for a very short period.
The head of Ukraine's gas transmission network also said Ukraine, through which several pipelines supply Russian gas to Europe, needed to collect 17 bcm of gas for next winter by the end of October, saying this would be difficult.
Refinitiv analysts wrote in a report that EU storage would hit 23% by October 1 if Russian supplies were completely cut off throughout the summer and there was no additional supply.
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"This level is a direct threat to the security of energy supplies in Europe," the analysts said.
Analysts also add that storage could be as high as 58% - still very low - if liquefied natural gas (LNG) transmission from northwestern Europe is maximized and pipe imports from alternative suppliers increase.
Washington and Brussels reached an agreement last week for the United States to supply 15 bcm of LNG this year, although it would not completely replace Russian gas imports.
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