Germany: G7 rejects Russia’s demand to pay for gas in rubles

The Group of Seven main economies have agreed to reject Moscow’s demand to pay for Russian pure fuel exports in rubles, the German power minister mentioned Monday.

Robert Habeck informed reporters that “all G7 ministers agreed fully that this (can be) a one-sided and clear breach of the prevailing contracts” for pure fuel, which is used to warmth properties, generate electrical energy and energy trade.

He mentioned officers from France, Germany, Italy, Japan, the US, the UK and Canada met Friday to coordinate and that European Union representatives additionally have been current.

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Habeck mentioned “fee in ruble shouldn’t be acceptable and we are going to urge the businesses affected to not observe (Russian President Vladimir) Putin’s demand.”

Putin introduced final week that Russia will demand “unfriendly” international locations pay for pure fuel solely in Russian forex any further, instructing the central financial institution to work out a process for patrons to amass rubles in Russia. The demand despatched already excessive fuel costs even increased amid fears it might be a prelude to a pure fuel shutoff, which might disrupt Europe’s economic system and damage Russia’s funds.

Economists mentioned the transfer appeared designed to attempt to assist the ruble, which has collapsed in opposition to different currencies since Putin invaded Ukraine on Feb. 24 and Western international locations responded with far-reaching sanctions in opposition to Moscow. However some analysts expressed doubt that it might work.

Requested by reporters earlier Monday if Russia might minimize pure fuel provides to European clients in the event that they reject the demand to pay in rubles, Kremlin spokesman Dmitry Peskov mentioned in a convention name that “we clearly aren’t going to provide fuel totally free.”

“In our scenario, it’s hardly doable and possible to have interaction in charity for Europe,” Peskov mentioned.

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Requested what occurs if Russia turns off the faucets now, Germany’s power minister mentioned, “We’re ready for all eventualities.”

“Putin’s demand to transform the contracts to ruble (means) he’s standing together with his again to the wall in that regard, in any other case he wouldn’t have made that demand,” Habeck mentioned, including that Russia wants rubles to finance its battle at house, comparable to funds to troops.

European governments have shied away from imposing a ban on power imports from Russia over fears of the affect it might have on the economic system. Europe will get 40% of its fuel and 25% of its oil from Russia, and because the battle, has scrambled to set out proposals to cut back its dependency. Russia is simply as reliant on Europe, with oil and fuel its dominant sector and paying for presidency.

Estimates of the affect of a fuel boycott or embargo on Europe fluctuate however most contain a considerable lack of financial output, particularly because the battle and the ensuing surge in power and uncooked materials costs is already weighing on Europe’s economic system. U.S. sanctions allow exceptions for funds for oil and fuel, although it has banned Russian power imports itself.

Putin’s rubles fee proposal led Germany’s utilities affiliation, the BDEW, to name on the federal government to declare an “early warning” of an power emergency.

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A spokeswoman mentioned Monday that the federal government doesn’t see the necessity for an early warning declaration at the moment.

When pressed by reporters on making the declaration, German Chancellor Olaf Scholz mentioned “the contracts we all know lay down the euro as fee forex and the businesses can pay in line with the contracts they’ve signed.”

What forex is used to purchase Russian power “would not actually matter,” mentioned Robin Brooks, chief economist on the Institute of Worldwide Finance, a commerce group for the world’s banks.

Russian President Vladimir Putin attends a gathering of the Supreme Eurasian Financial Council in Yerevan, Armenia.
(Shutterstock)

“What issues is that power exports give Russia buying energy, which it could convert into items from overseas,” she mentioned.

Putin’s demand for fee in rubles “is usually window dressing. It doesn’t change the underlying transactions,’’ Brooks mentioned. “On the margin, I might name this one other ‘personal purpose’ by Putin, because it will increase the give attention to fuel purchases by Western Europe and will doubtlessly elevate the chances of an import cease.”