German Gas Utilities Ask for Early Warning System Amid Putin’s Rouble Requirement

Germany’s utilities association BDEW said the country needs an early warning system to deal with gas shortages, one day after Putin ordered gas payments from “unfriendly” countries to be received in roubles, which could increase the risk of a supply crunch and even higher prices.

Putin’s demand added to market concerns and raised doubts over Russia’s claim of being a reliable supplier regardless of geopolitical circumstances.

Putin’s demand came on Wednesday after the Western allies have cooperated on waves of sanctions against Moscow following its invasion of Ukraine.

Since Putin’s remarks, Europe’s energy sector is already facing supply concerns and the benchmark price for German gas delivery next year is up 8%, after already quadrupling over the last 12 months.

Germany, the biggest consumer of Russian gas, has been able to get shipments for more than 50 years, even during the Cold War. Russia’s gas exporter Gazprom has over 40 long term contracts with European nations.

On Thursday, BDEW, which includes Gazprom customers RWE and EnBW as members, said the government should implement an early warning system in case Russian gas deliveries are halted. The association urged German energy regulator Bundesnetzagentur to set criteria by which industries and sectors would continue to receive supply, and households are protected.

German economy minister Habeck said while the situation needs to be watched closely, there is no need for an early warning system and that supply is guaranteed.

If Putin’s requirement is concrete and serious, European customers will be faced with a dilemma: either decline to pay and risk getting no supplies or comply and pay higher prices as more favorable long term contracts get renegotiated.

Russia has not yet halted gas flows but it could increase the prices Europe pays.

Gas deliveries westwards to Europe through the Nord Stream 1 pipeline across the Baltic Sea rose slightly on Thursday, while the Yamal-Europe pipeline flowed east from Germany into Poland.

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