Why does Putin want western companies to pay in rubles?
That’s still quite complicated. In any case, it is clear what he wants to achieve with it. Settlement in rubles increases demand for the Russian currency, halting the free fall that the currency had fallen into in recent months. This makes it less expensive for Russians to buy foreign products.
The construction itself is strange. Gazprom receives about a billion euros every day for the gas it sells to EU countries. Gazprom could also buy its own rubles with that money, you might say. But apparently that is not possible due to the sanctions against Russia. Putin actually wants to circumvent those sanctions by making European companies pay directly in rubles. Or, as became clear later in the day on Thursday, with a strange ball-ball construction via the Gazprombank in Luxembourg.
How seriously does the market take the ‘ruble decision’?
The Dutch gas trading house Gasterra says it will stick to the agreements that have been made about payments in euros. Eneco, which has a contract with Gazprom subsidiary Wingas, also states that it assumes that it can continue to pay the bill in euros. Vattenfall also announced on Thursday that it will continue to pay in euros.
Are gas prices going up again?
The price on the important Dutch TTF gas market rose, but not spectacularly. Shortly after Putin’s announcement, the price of gas shot up from about 110 euros per megawatt hour to almost 130. Later it dropped again to 121 euros. This means that it remains far below the level of 217 euros a month ago. The market apparently expects that the decree will not lead to an immediate shutdown of the gas.
Nevertheless, governments are taking into account that the gas tap from Russia may be closed. What would that mean for the Netherlands and Europe?
If Russia turns off the tap, the lights will not go out immediately in the Netherlands and the rest of Europe. At the end of the winter, Dutch gas reserves are now about one-fifth full. In addition to stocks, the Netherlands has other sources, such as small fields in the North Sea, liquid LNG arriving via the port of Rotterdam and natural gas coming from Norway via pipelines.
However, cutting off Russian gas would indeed require immediate action. Because it has been agreed in the European Union that by 1 October all gas storage facilities in Europe must be 90 percent full, in order to get through the coming winter without any problems. That is already a challenge with Russian gas. When the Kremlin turns off the tap, filling becomes a daunting task altogether.
Other European countries are already anticipating this. For example, Germany issued a ‘gas alarm’ on Wednesday, which means that consumers and companies must be more economical with gas. The underlying idea is that all the gas that is not used now will come in handy next winter.
Does the Netherlands also have such an alarm plan?
Yes. Every EU member state is obliged to have a plan for situations in which the energy supply stops. The Netherlands also has an (emergency) plan to save gas.
The first step is an information campaign that will start on Saturday. This should invite consumers and companies to use gas and electricity sparingly. Saving is slightly less effective in summer than in winter, because consumers will use relatively little energy to heat their homes in the coming months. But showering less and sparing use of energy-hungry devices also have an effect. A next phase in the emergency plan would be that certain companies would be allowed to use less or no more energy by order of the government.
How does the emergency plan work if companies get less gas?
That’s not entirely clear yet. In recent months, the Ministry of Economic Affairs has made an inventory of how such a shutdown of companies should take place in practice. The sixty largest energy consumers were questioned about the possible consequences. That data is not public, because it is business-sensitive information.
Some companies have provided some explanation in recent months. This shows that closing sounds simpler than it is. Take the Sappi paper factory from Maastricht, for example. Stopping production would of course be annoying for all customers of that paper. But an unintended side effect would be that the residents of the neighboring district may soon be left out in the cold: their homes will be heated with the residual heat from the factory.
There are also industries for which an immediate closure would be disastrous. For example, it would cause irreparable damage if the furnaces leave glass or steel factories. A good shutdown plan should take all these considerations into account.