Third day of TASI gains as oil prices continue to fall: Closing bell

FRANKFURT/LONDON: Russia said it would work out practical arrangements by Thursday for foreign companies to pay for its gas in roubles, raising the probability of supply disruptions as Western nations have so far rejected Moscow’s demand for a currency switch.

President Vladimir Putin’s order last week to charge “unfriendly” countries in roubles for Russian gas has boosted the currency after it fell to all-time lows when the West imposed sweeping sanctions against Moscow over its invasion of Ukraine, which also sent European gas prices higher.

“No one will supply gas for free, it is simply impossible, and you can pay for it only in roubles,” Kremlin spokesperson Dmitry Peskov told reporters on Tuesday.

The move has drawn strong criticism from European countries, which pay for Russian gas mostly in euros and say Russia is not entitled to redraw contracts, with the G7 nations rejecting Moscow’s demands this week.

Russia has so far met its contractual obligations for gas supplies to Europe.

Peskov said that in line with a March 31 deadline set by Putin, “all modalities are being developed so that this system is simple, understandable and feasible for respected European and international buyers.”

Putin’s demand has also stoked fears in Germany, Europe’s top economy, about major disruptions to gas supplies should utilities fail to pay in roubles, and how this would affect industry and households.

Data from Gas Infrastructure Europe shows gas storage levels on the continent stand at just 26 percent currently, highlighting the challenge to replace Russia as an energy provider.

Markus Krebber, CEO of Germany’s largest utility RWE and a customer of Gazprom, said earlier this a complete stop of Russian gas imports could only be tolerated for a very brief period.

Germany would need three years to organize alternative gas supplies to become independent from Russia, the chief executive of utility E.ON said on Monday.

Peskov said that Russia, which says it is conducting a “special military operation” in Ukraine and is entitled to defend itself against sanctions, has been and will be a reliable supplier of gas.

But foreign companies would need to buy roubles and use them to make payments for gas, he added.

Separately, Valentina Matviyenko, the speaker of the upper house of parliament, said Russia was ready if Europe refused to buy Russian energy supplies.

If that happened, it could redirect supplies to Asian markets among others, TASS news agency quoted her as saying.

Russian gas deliveries to Europe through three key pipeline routes were broadly steady overall on Tuesday morning, little changed from Monday evening.