Germany Triggers Emergency Plan as Putin Wants Gas Paid in Rubles

A worker rides his bicycle to the BP oil refinery Ruhr Oil in Gelsenkirchen, Germany, on March 28, 2022. Martin Meissner/AP Photo

Berlin has triggered the first stage of an emergency plan for managing gas supplies due to concerns of potential supply disruptions following Russian President Vladimir Putin’s push to make “unfriendly” nations buy gas in rubles.

Germany’s emergency gas plan has three levels. The first is the early warning, which is triggered when there are signs that a supply crisis might emerge. The second level is triggered when extremely high demand or supply disruptions upset the market balance. In this scenario, the imbalance can be rectified without any interventions.

The third level is triggered when market-based measures become inadequate to balance gas shortages. Germany’s energy regulator will then intervene and decide how to ration gas supplies in the country at this final stage.

Germany is highly dependent on Russia for gas, with Moscow accounting for 55 percent of gas imports in 2021. During the first quarter of 2022, that number was at 40 percent. Failure to secure enough gas will hit Germany’s industrial sector especially hard, which currently uses 25 percent of the country’s total gas demand.

“This means that industrial production gets lost, that supply chains get lost,” Leonhard Birnbaum, chief executive of German energy group E.ON, said to public broadcaster ARD. “We are certainly talking about very heavy damages.”

Germany’s scramble to secure gas supplies comes a week after Putin indicated that “unfriendly” nations would have to buy Russian oil and gas in rubles. Putin’s comments were a retaliatory response to Western sanctions imposed on Russia for its invasion of Ukraine, a move that devalued the ruble, harmed Moscow’s economy, and drove up inflation across the country.

Following Putin’s comments, Robert Habeck, Germany’s minister for economic affairs, rejected the Russian president’s demands.

“All G–7 ministers agreed completely that this (would be) a one-sided and clear breach of the existing contracts,” he said to reporters on March 28.

Russia’s top lawmaker Vyacheslav Volodin indicated on March 30 that Moscow might even make the European Union pay rubles for other commodities such as metals, grains, fertilizers, timber, and coal.

A proposal to switch payments to rubles is said to be due on March 31. However, Kremlin spokesperson Dmitry Peskov rejected any notion that ruble payments would become compulsory on that date.

“As we discussed before, payments and delivery is a time consuming process ... This does not mean that a [sic] tomorrow’s delivery should be paid (in rubles). From a technological point of view, this is a more prolonged process,” he said.

Germany said Wednesday that Russia had given it assurances that European countries would not have to pay for Russian gas in rubles.

Though Germany has pledged to end its energy dependence on Russia, Habeck has indicated that this will not be possible before mid-2024.

Reuters contributed to this report.