Putin tells Europe: You still need Russian gas but we’re turning east

Energy analysts such as former Bulgarian Ambassador to Russia Ilian Vassilev and Martin Vladimirov (Center for the Study of Democracy) commented that Putin’s decision aims to hurt Bulgaria, the weakest link in NATO and the EU. Political events in Sofia show that this is exactly what is happening. [Kremlin pool/EPA/EFE]

President Vladimir Putin said on Thursday (14 April) that Moscow would work to redirect its energy exports eastward as Europe tries to reduce its reliance on them, adding that European nations would not be able to ditch Russian gas immediately.

Russia supplies around 40% of the EU’s natural gas, and western sanctions over what Moscow calls its “special military operation” in Ukraine have hit its energy exports by complicating the financing and logistics of existing deals.

While the EU debates whether to slap sanctions on Russian gas and oil and member states seek supplies from elsewhere, the Kremlin has been forging closer ties with China, the world’s top energy consumer, and other Asian countries.

“The so-called partners from unfriendly countries concede themselves that they won’t be able to make do without Russian energy resources, including without natural gas, for example,” Putin told a televised government meeting.

“There is no rational replacement (for Russian gas) in Europe now.”

Putin also said that Europe, by talking about cutting off energy supplies from Russia, was driving up prices and destabilising the market.

He said Russia, which accounts for around a tenth of global oil production and around a fifth of gas, would need new infrastructure to boost energy supplies to Asia.

He ordered the government to present a plan by 1 June including on “expanding transport infrastructure to countries of Africa, Latin America (and the) Asia Pacific.”

He also sought clarity on the possibility of including two pipelines – China-bound Power of Siberia and the far-eastern Sakhalin-Khabarovsk-Vladivostok in Russian unified system of gas supplies.

Plugging those routes into the wider network may allow Russia, in theory, to switch gas flows from Europe to Asia and visa versa.

Russia launched pipeline gas supplies to China in the end of 2019 and in February agreed a 30-year contract via a new pipeline, yet to be built, with plans to settle sales in euros.

Alluding at the Western sanctions, Putin also said that Russia needs to replace imports of equipment for oil and gas production.

Putin also said that the role of national currencies in exporting deals should rise, amid Russia’s plans to switch to roubles in payments for its gas supplies, mainly to Europe.

Payment in euro to continue?

Putin told Chancellor Karl Nehammer during their meeting this week that Austria’s supply of gas can continue to be paid for in euros, Nehammer was quoted as saying by Austrian news agency APA on Thursday.

Putin said “that the gas supply is secured, that Russia will deliver the contractually agreed quantities and that payments can continue to be made in euros”, APA quoted Nehammer as saying in a joint interview on Wednesday with German news agency DPA.

The European Commission has said those with contracts requiring payment in euros or dollars should stick to that, which Nehammer has said Austria will do.

At the same time, Russia appears to have opened a door to continued payment in euros.

Russia has seen a steep decline in production of oil, its key source of revenues, amid difficulties with payments for trading and vessels.

Major global trading houses are planning to reduce crude and fuel purchases from Russia’s state-controlled oil companies as early as 15 May, sources said, to avoid falling foul of EU sanctions on Russia.

Putin said the sector’s most acute problems were related to the disruption of energy supply logistics.

(Edited by Georgi Gotev)

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