Putin "Will Accept Euro"…Europe Barely Overcomes Gas Supply Crisis (Comprehensive)

Rublev Payment Demand Proposal Steps Back
Tension Eases and Caution Over US LNG Share Expansion
Germany and Austria Announce Emergency Gas Supply Plans

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] Russian President Vladimir Putin announced that European countries that have existing gas supply contracts with Russia can pay for gas in euros instead of rubles as before. European countries, which had concerns about gas supply cuts, are expected to escape the immediate energy crisis.

The reason Russia stepped back from its initial demand for ruble payments is interpreted as a move to monitor the increasing share of U.S. liquefied natural gas (LNG) imports in the European natural gas market. Countries highly dependent on Russian natural gas, such as Germany and Austria, have even announced emergency plans in preparation for the possibility of future supply cuts by Russia.

Putin: "Will Receive Euro Payments via Gazprombank"

[Image source=Reuters Yonhap News]

According to foreign media including CNN on the 30th (local time), German government spokesperson Steffen Hebestreit stated in a press release, "Chancellor Olaf Scholz had a phone call with President Putin, during which President Putin informed Chancellor Scholz that Russia’s gas payments would continue to be made in euros rather than rubles," adding, "President Putin explained that if European countries transfer euros to Gazprombank, which is currently unaffected by sanctions, the bank will convert them into rubles internally."

In the call, Chancellor Scholz did not agree with the payment method explained by President Putin but requested a written explanation to better understand the detailed payment procedures, according to the German government. Following Scholz, President Putin also had a phone call with Italian Prime Minister Mario Draghi, reportedly explaining that euro payments would remain possible.

Earlier, after the G7 countries outright rejected Russia’s demand for ruble payments the previous day, concerns about Russia cutting gas supplies arose in Europe, causing gas prices to surge. The Dutch TTF exchange, a key European natural gas benchmark, recorded a natural gas futures price of 118 euros (approximately 160,000 KRW) per megawatt-hour (MWh), up 8.87% from the previous session.

Measures to Ease Tensions Amid Growing U.S. LNG Share in Europe

[Image source=Reuters Yonhap News]

The reason Russia stepped back from its declaration on the 23rd that it would only accept ruble payments for natural gas purchases is attributed to the rapidly increasing share of U.S.-sourced LNG in the European natural gas market.

According to energy specialist media OilPrice.com, the share of U.S. LNG in the European natural gas market surged from 7% at the end of last year to 32% last month. Following France and the United Kingdom, Poland and Eastern European countries have also announced plans to increase their imports of U.S. LNG, raising concerns that the share of Russian natural gas will sharply decline.

European countries are pursuing supply contracts not only with the U.S. but also with Qatar, another major natural gas exporter. According to The Wall Street Journal (WSJ), Germany, France, Belgium, and Italy are reportedly in discussions to sign long-term LNG supply contracts with Qatar. Qatar has also announced plans to increase its natural gas production capacity by more than 40% by 2026, suggesting significant changes in the European natural gas market in the future.

Germany and Austria Enter Emergency Plans

[Image source=Yonhap News]

Although Russia has stepped back on the ruble payment issue, the possibility of provocations involving gas supply cuts remains high, prompting Germany and Austria to initiate emergency plans.

German Economy Minister Robert Habeck stated in a press release that "gas storage facilities in Germany are about 25% full," adding, "there is currently no supply shortage, but preventive measures are necessary considering the possibility of Russia cutting supplies."

Austrian Chancellor Karl Nehammer also announced at a press conference held in Vienna that "all possible measures will be taken to ensure gas supply to Austrian households and businesses," declaring the implementation of the first phase of the emergency plan.

The 'early warning phase,' the first stage of the gas supply emergency response activated by Germany and Austria, involves monitoring the gas supply status by a joint public-private team and, if supply shortages worsen, suspending gas supply to the industrial sector. Germany imports 55% of its total natural gas from Russia, and Austria imports 80%, raising concerns that gas supply and demand will become difficult if Russia fully cuts off gas supplies, which is why these measures were issued.

In particular, Germany currently lacks LNG import terminals, raising concerns that changing import sources immediately will be difficult. According to The Wall Street Journal (WSJ), the German Ministry of Economy announced that it signed a memorandum of understanding (MOU) on the 5th with energy companies RWE AG and Dutch Gasunie to construct the Brunsb?ttel LNG terminal.

This content was produced with the assistance of AI translation services.