Cyprus Mail 30 March 2022 - by Reuters News Service
Russia’s demand that some buyers pay for its gas in roubles has raised concerns in Germany, which relies on Russian fuel, that the payment dispute could escalate and disrupt supplies.
Russia accounted for 55 per cent of Germany’s gas imports in 2021. Although that figure fell to 40 per cent in the first quarter of 2022, Economy Minister Robert Habeck has said Germany will not achieve full independence from Russian supplies before mid-2024.
WHAT’S THE PROBLEM?
Moscow said last week it would draw up a mechanism by March 31 under which so-called “unfriendly” countries – those behind sanctions imposed over Russia’s invasion of Ukraine – would pay for gas in roubles. That includes Germany, Europe’s industrial powerhouse, and other European allies.
Most now pay in euros or dollars.
Habeck, who is the minister responsible for Germany’s energy security, has rejected Russia’s demand, saying contracts would be honoured under current terms.
Responding to a question related to Russia’s latest plans, Kremlin spokesman Dmitry Peskov said: “No payment – no gas.”
Russia’s biggest German customers are Uniper (UN01.DE), RWE (RWEG.DE) and EnBW’s (EBKG.DE) VNG (VNG.UL), which all have long-term gas supply contracts. They have not commented on questions about individual preparations for any disruption.
WHAT HAPPENS IF SUPPLY IS DISRUPTED OR STOPS?
Germany’s utility association BDEW has called on the government to draw up a national emergency plan to prepare for disruptions to Russian gas supplies.
Berlin already has an “Emergency Plan Gas” that outlines three crisis levels to deal with such an event.
The first level is the early warning, when there are signs a supply emergency is developing. The second is alarm, when a disruption to supply or extraordinarily high demand upsets the usual balance but can still be corrected without intervention.
The third level is emergency, when market-based measures have failed to remedy shortages. At this stage, Germany’s network regulator, the Bundesnetzagentur, must decide on how to distribute remaining gas supplies across the country.
Till now, the authorities have not indicated that any of these levels have been reached.
WHO IS FIRST AFFECTED?
If Germany does not secure enough gas, industry will be hit first. It accounts for a quarter of German gas demand.
“This means that industrial production gets lost, that supply chains get lost,” Leonhard Birnbaum, chief executive of German energy group E.ON (EONGn.DE), told public broadcaster ARD. “We are certainly talking about very heavy damages.”
Private households will have priority over industry, while hospitals, care facilities and other public sector institutions with special needs would be last to be affected by a disruption.
GERMANY DECLARES 'EARLY WARNING' OF POSSIBLE SUPPLY INTERRUPTIONS
Germany on Wednesday declared an “early warning” of a possible gas supply emergency, saying the measure was designed to prepare for the risk of disruption or stoppage of natural gas flows from Russia.
The announcement – the clearest sign yet that the European Union is preparing for supply disruptions after imposing unprecedented sanctions following Russia’s invasion of Ukraine – comes as Moscow plans to introduce a new mechanism switching payment for its gas to roubles.
That demand has been rejected by the G7 nations, including Germany, and stoked fears of disruptions.
Under Germany‘s existing gas emergency plan, the early warning is the first of three stages and does not yet imply state intervention to ration gas.
But Economy Minister Robert Habeck urged consumers and companies to reduce consumption, saying that “every kilowatt- hour counts”.
PREPARE FOR ‘ALL SCENARIOS’
He told a news conference that gas supplies were safeguarded for the time being, and that Germany was closely monitoring supply flows with market operators.
“Nevertheless, we must increase precautionary measures to be prepared for an escalation on the part of Russia,” said Habeck. “With the declaration of the early warning level, a crisis team has convened.”
Russia accounted for 55% of Germany‘s gas imports in 2021. Although that figure fell to 40% in the first quarter of 2022, Habeck has said Germany will not achieve full independence from Russian supplies before mid-2024.
The crisis team, which includes members of his ministry, the German network regulator, network operators, and representatives of Germany‘s 16 federal states would closely monitor the situation “so that – if necessary – further measures can be taken to increase supply security”.
The head of German network regulator Bundesnetzagentur, Klaus Mueller, in a tweet said the aim of the early warning was to avoid a deterioration of supply and urged consumers and industry to prepare for “all scenarios”.
