Stop Russian gas exports, “Moscow has more to lose than Europe”

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While Vladimir Putin announced on Thursday that Russian gas should now be paid for in rubles, the European Union, Moscow’s largest buyer, categorically rejected him and said it was considering other delivery scenarios. France 24 deciphers this new phase of the confrontation surrounding the war in Ukraine with Francis Perrin, energy specialist at Iris.

Could the war in Ukraine lead to a premature halt to Russian gas exports to Europe? While European Union (EU) countries decided to exempt gas deals from their sanctions against Russia, Vladimir Putin announced on Thursday March 31 that “unfriendly” countries would henceforth have to pay their bills in rubles.

A demand deemed unacceptable by the EU, the world’s largest buyer of Russian gas, which has urged Russia to honor its contracts, which provide for payments in euros and sometimes dollars.

Faced with threats from Moscow, which now says it is turning to the Asian market, the French and German governments said on Thursday they are preparing for a possible halt to Russian gas imports.

To analyze the possible consequences of such a decision for both the EU and Russia, France 24 spoke to Francis Perrin, research director at the Institute for International and Strategic Relations (Iris), a specialist in energy issues.

France 24: What do you think of Vladimir Putin’s announcement? European leaders claim they have received pledges they could continue buying gas in euros. Is the threat from Russia credible?

Franz Perrin: This threat is not really credible. For two reasons.

First, it contradicts the content of the contracts binding Gazprom and European gas companies, which provide for payments in euros and sometimes in dollars. Unilaterally changing such contracts is illegal, and Vladimir Putin knows it.

The other reason is that there are several stories from Moscow: Vladimir Putin announcing the commitment; the same Vladimir Putin, who assures Olaf Scholz and Mario Draghi that nothing will change, and the Kremlin spokesman Dmitry Peskov, who speaks of a gradual introduction of payments in rubles.

It is therefore, in my opinion, a bluff on which Vladimir Putin is a great specialist. As so often, he makes a strong statement to gauge reactions and adjust his strategy.

Paris and Berlin are said to be preparing for a possible halt to Russian gas imports, do they have sufficient withdrawal options? ?

First of all, it has to be said that the Europeans have not imposed sanctions on Russian gas – which accounts for 45% of their imports – because they cannot do without it in the short term. But with the war in Ukraine, there is now a plan on the table to significantly reduce this dependency in 2022, with a view to completely withdrawing Russian gas by 2027. There are three levers for this: finding new natural gas suppliers, replacing part of the Replace gas consumption with other energy sources, especially renewable sources, and ultimately save on electricity consumption. This strategy should reduce Russian imports by at least a third this year.

As for new suppliers, a deal has already been signed with the United States to increase their supplies of liquefied natural gas, which should eventually offset a third of current Russian imports. Other potential partners include Qatar, Algeria, Nigeria, Egypt, Norway and even Azerbaijan.

Russia is Europe’s largest gas supplier and Europe is its main customer. In the current war context, is Vladimir Putin really in a strong position on this issue? ?

Russia is not in a strong position for one simple reason: it is even more dependent on the European market than Europe is on Russian exports. In other words, Moscow has more to lose in this matter than Europe.

Of course, flipping the Russian page is not easy for the EU, but it already has sufficient infrastructure to increase its LNG imports, at least initially. Although these deliveries cost more, they have one major advantage: they are more flexible because they are delivered by boat rather than gas lines. This flexibility allows for greater security of supply as sources can be more easily diversified.

On the Russian side, the industry is mainly oriented towards Europe and large infrastructure investments will be required to massively export the gas by sea, which requires liquefaction. Outside the EU, Moscow exports gas to Japan, Korea and China. The first two, allies of the United States, will support his position. That leaves China, which is certainly an ally of Russia but with whom talks on trade deals are not easy, especially when the balance of power is in its favour.

Of course, Russia will also try to find new customers, but its situation will be more difficult because it has fewer partners than Europe, but also fewer potential partners.

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