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Germany Prepares For Possible Gas Rationing As Russia Demands Payment In Rubles

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Updated Mar 30, 2022, 07:46am EDT

Topline

Germany’s government on Wednesday activated the first phase of an emergency law to prepare the country for possible gas rationing, a signal that it is bracing for possible shortages as Western nations push back against sanctions-hit Russia’s demand for gas and other export payments in rubles.

Key Facts

German economics minister Robert Habeck triggered the “early warning phase” of Germany’s emergency gas law to convene a crisis team that will assess the current supply situation.

In its statement, the economics ministry said that this was a precautionary measure at the moment and the security of supply “continues to be ensured.”

The ministry urged German businesses and people to try and reduce their energy consumption as much as possible as the country embarks on a plan to wean itself off Russian gas.

The statement noted that Germany joined other G7 nations in rejecting Russian demands last week to pay for gas imports in rubles, adding that this was a “breach of the private-sector supply contracts.”

In a sign of possible escalation on the issue, the speaker of the Russian Duma Vyacheslav Volodin in a Telegram post on Wednesday warned European leaders, “If you want gas, find rubles.”

Volodin added that Russia may widen its ruble payments demand for EU nations to include other exports like “fertilizer, grain, food oil, oil, coal, metals, timber” among other things.

Crucial Quote

“Security of supply continues to be ensured. There are no supply bottlenecks at present. Nevertheless, we need to step up our preventive measures in order to be ready to cope with any escalation by Russia,” German economics minister Robert Habeck said.

Big Number

41%. That’s the share of Russian gas that makes up the European Union’s total gas imports, according to the bloc’s Directorate-General for Energy. It’s unclear if this number has been affected by Russia’s invasion of Ukraine and subsequent western sanctions against it.

Key Background

Last week, Russian President Vladimir Putin said he was planning to make “unfriendly” pay for Russian gas in rubles, a demand that was rejected by the G7 group of nations. The Russian demand for ruble payments came after it was hit by a flurry of severe economic sanctions for its invasion of Ukraine. These sanctions pushed the price of the ruble to historic lows against the U.S. dollar and caused the Russian stock market to crater. While Russia has not outlined its motive for demanding payments in rubles, experts believe it could be an effort to help prop up the currency. In theory, importing nations would have to buy rubles in exchange for currencies like the U.S. dollar or the Euro which would allow Moscow access to currencies that have become scarcer since most of its foreign reserves were frozen as part of sanctions.

Further Readinv

Germany takes step towards gas rationing over payment stand-off with Russia (Financial Times)

What would paying for natural gas in rubles mean? (Associated Press)

Why Europe is so dependent on Russia for natural gas (CNBC)

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