Russia’s war in Ukraine has triggered a fundamental shift in its energy trading relationships, as European leaders take action to cut the Old Continent’s reliance on Russia for energy supplies.
As Poles and Bulgarians worry their cookers and heaters will run dry, the rest of Europe is scrambling to respond after Vladimir Putin’s latest chess move over the Ukraine conflict – cutting off the gas supply to his major customers. Moscow last week halted natural liquefied natural gas (LNG) deliveries to Poland and Bulgaria and has threatened to do the same to other countries over their support for Kyiv, prompting accusations of blackmail by European nations and the United States. Putin’s tactic has been widely interpreted as a warning to his opponents in Europe – who also happen to be reliant on Russian gas, oil and other petrochemical products – as well as an effort to replenish his cash reserves. The message: no rubles, no gas.
A day after the Kremlin turned off the tap, a German and an Italian energy provider reportedly opened accounts with Russian bank Gazprombank to buy Russian gas, handing Moscow a big win in its efforts to receive payments in rubles. While challenging the EU’s efforts to maintain a united front against Moscow, energy companies can stay technically compliant with the sanctions under a loophole that allows them to pay Gazprombank in euros, which the bank would convert into rubles in a separate account. Meanwhile, Germany has said it would be able to cope if Russian oil supplies were cut off by an embargo or a decision by Moscow to switch off the taps. Economy Minister Robert Habeck said that Russian oil now accounts for 12% of total imports, down from 35% before the war, and most of it goes to the Schwedt refinery near Berlin. He acknowledged that losing those supplies could result in a “bumpy” situation for the capital and surrounding region, with price hikes and shortages, but that wouldn’t result in Germany “slipping into an oil crisis”.
This comes as the EU is edging towards a ban on imports of Russian oil by the end of the year, diplomats said, after emergency talks between the Commission and EU countries at the weekend. On Monday (2 May) discussed the need to urgently secure non-Russian gas supplies and fill storage, as countries brace for supply shocks. The bloc has also been striving for a united response to Moscow’s demand that European buyers pay for Russian gas in rubles or face their supply being cut off. Many countries are heavily dependent on Moscow for energy needs and there are disagreements over how sanctions should be enforced. Poland’s climate minister said on Monday that her country — which advocates tough measures against Russia — is ready to help Germany wean itself off Russian oil, Reuters reports. “As Poland, we are ready to support Germany’s ambitions of de-Russification with our refinery in Gdansk,” Anna Moskwa said. “I hope that will be the last voice that will … block these sanctions on oil.” Countries in Eastern Europe are partnering up to develop projects and share resources to counter the Russian dominance in the gas market and curb the EU’s reliance on Russian supply.
