Germany Forced to Ration Gas after Refusing to Make Payments in Rubles
German Energy Minister Robert Habeck has activated the 'early warning phase'
After Moscow demanded its European “partners” pay for its oil and gas in rubles instead of euros, the German government has refused to pay in the Russian currency and is now suffering energy shortages in Europe’s largest economy.
According to FT, German Energy Minister Robert Habeck has activated the “early warning phase” of Germany’s gas emergency law, which was adopted to help ration supplies in the face of a severe shortage.
The decision will alert German consumers and businesses to do what they can to conserve energy.
Biden and the US will take years to reroute their promised LNG exports.
Habeck issued the warning for fear that Moscow would swiftly move to cut off energy exports to one of its biggest customers in Europe over its refusal to make payment in rubles, which Habeck has insisted would be a violation of the two sides’ contract.
As ZeroHedge notes:
The move was triggered by German concern that Russia might cut supplies to the country and its neighbors because they are rebuffing Moscow’s efforts to force payment for gas imports in rubles.
After demanding last week that “hostile states” pay for its gas and oil in rubles (although it hinted that gold and cryptocurrency might also be considered), Moscow said it wouldn’t share its resources “for free” after the G-7 aggressively repudiated the Russians’ request.
“We will definitely not supply oil and gas for free, that’s for sure. It’s hardly possible and reasonable to engage in charity in our situation,” Putin spokesman Dmitry Peskov said earlier this week.
As Germany scrambles to address a looming shortfall in energy supplies, analysts are warning that the government’s refusal to meet Moscow’s request for payment in rubles could create a “substantial” risk.
During the early warning phase - the first of three stages in Germany’s emergency response - a crisis team from the economics ministry, the regulator, and the private sector will monitor imports and storage.
If supplies fall short, and less draconian attempts to lower consumption do not work, the government would cut off certain parts of German industry from the grid and give preferential treatment to households.
Volker Wieland, a professor of economics at Frankfurt University and a member of the German council of economic advisers, on Wednesday warned that a halt in Russian energy supplies would create a “substantial” risk of a recession and bring Europe’s largest economy “close to double-digit rates of inflation.”
Already, the German economy is facing its most brutal inflation in decades, with an annual headline inflation rate that could top 6% by the end of the year.
The dire situation has already prompted the government to subsidize citizens’ energy costs with a round of energy stimmies.
As Neon Nettle reported:
Putin also ordered the central bank and government to determine the scheme of ruble payments for Russian gas and ordered Gazprom to make corresponding changes to gas contracts.
The Russian leader also said they would continue supplying contracted volumes, will only change payment currency.
The ruble is going from strength to strength, rising over 5% at MICEX after indicative prices briefly jumped more than 8% twice.