Today was the deadline for Poland and Bulgaria to pay Russia energy giant, Gazprom, in rubles, for their natural gas. They have refused for the last four weeks to cooperate with Gazprom’s demand to be paid in rubles, and now, as promised, Gazprom cut off their service. There was some consternation in Europe, prompting assurances from various countries (e.g., Italy, Germany, Hungary) to the effect that they were still in line for getting their natural gas supplies. Meanwhile, this morning the price for May futures on the TTF trading hub (out of the Netherlands) sky-rocketed up to $1,374 per 1,000 cubic meters. That translates to almost $125/megawatt-hour for households.
The European Union has pressured countries to “Just Say ‘No'” to Russia, maintaining that the payment arrangements violate the agreed-upon sanctions against Russia. (Customers of Gazprom are required to set up two accounts at Gazprombank, whereby they use whatever currency they like to pay, instruct the bank to convert the funds into rubles to be deposited in their second account, and pay for their natural gas purchase from that ruble-denominated account.) However, Austria’s Chancellor Karl Nehammer threw a monkey wrench into that narrative.
Nehammer gave his press conference, stressing that, while Austria opposes Russia’s military mission in Ukraine, it has accepted the new ruble gas payment mechanism and will abide by it: “We, that is, OMV [Austria’s state energy company], accepted the terms of payment, as did the German government. They were found to be in line with the terms of the [EU] sanctions. For us, this was important.” Austria’s oil and gas company, OMV, has already opened an appropriate account with a Russian bank for transferring payments; and Nehammer noted that, during his recent trip to Moscow, Putin explained to him the new payment mechanism and assured him of further gas supplies in full. Basically, just because one thinks that it is proper to apply sanction pressures on Russia, it doesn’t mean that all rules are off and it is time to go crazy.
