Officials have unanimously rejected the Russian president’s calls for “unfriendly” countries to pay for gas imports in rubles instead of currencies such as the euro and the dollar, German Economy and Energy Minister Robert Habeck told reporters in Berlin on Monday. The statement raised the possibility of cutting off gas supplies to Europe if the two sides could not agree on a payment currency. Habeck said the G7 countries were “ready” for “all scenarios”, including a possible shutdown of Russian energy supplies. Putin announced last week that Moscow would start pricing European buyers of gas in rubles, Russia’s latest response to unprecedented Western sanctions in an attempt to punish him for invading Ukraine. Speaking after a sham meeting with ministers from the United States, the United Kingdom, France, Japan, Italy and Canada, Habeck said: “All G7 ministers have fully agreed that [requiring payment in roubles] it would be a clear and unilateral breach of existing conventions. ” Western companies usually agree on long-term supply agreements for Russian gas imports, and it remains unclear how Moscow will try to implement any change in the payment currency. Analysts said most of the deals were traded in international currencies and were unlikely to contain clauses allowing payments in rubles. European gas importers, including France’s Engie and Austria’s OMV, have said supply contracts do not include ruble payment clauses. They said they intend to continue paying in euros or dollars, as stipulated in their existing agreements.

Habeck said Putin’s move to charge Russia for energy in rubles showed that he “has his back to the wall” because the sanctions are seriously hurting the Russian economy. Laurent Ruseckas, chief executive of S&P Global in Europe, the Middle East and Africa, said the EU and Russia were at a dead end over the flow of gas supplies. If the EU introduces a law against payments in rubles, then “either someone turns a blind eye, or you resort to force majeure”, which means that gas supplies to Europe will be cut off. If Russian law requires payment in rubles, state-owned companies such as Gazprom – Russia’s largest gas supplier – will have to start discussions to amend the contracts. This would create an opportunity for European utilities to seek to renegotiate the duration of contracts and supply volumes, say industry executives. Rusekas said Russia seemed to be taking a “rational” approach to changing the currency of payment for gas bought from “unfriendly” countries, although there was little sign that buyers were ready to comply without any concessions. Gazprom, government and central bank officials will report to Putin on Thursday on how to implement the plans to convert payments into rubles, according to Interfax. European gas prices were relatively stable on Monday with first-month futures tied to TTF, Europe’s wholesale gas price, rising as much as 10 percent to 109 euros per megawatt-hour before falling. Analysts said prices would probably have fallen without uncertainty about payment terms, as Europe had significantly replenished gas storage levels over the weekend, raising them almost to double the 2018 low. The EU has avoided imposing sanctions directly on energy imports from Russia. However, European energy buyers could have a hard time finding a bank that complies with sanctions to convert euros into rubles. The EU could also respond with its own sanctions to prevent euro-to-ruble exchanges. Germany unveiled targets last week to quickly reduce its dependence on Russian energy, pledging to wean itself off the country’s gas by mid-2024 and become “virtually independent” of its oil by the end of this year.

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