The German government has triggered the first stage of an emergency plan for natural gas supplies and urged consumers to save energy in the face of growing concerns that sanctions-hit Russia could stop deliveries unless it is paid in roubles.
Russian President Vladimir Putin announced last week his country would only accept payments in roubles for natural gas deliveries to “unfriendly countries” – those that have imposed sanctions over Russia’s invasion of Ukraine, including all European Union members.
The announcement was seen as an effort to shore up the rouble, which has collapsed against other currencies since Russia invaded Ukraine on February 24 and Western countries responded with debilitating sanctions against Moscow.
Russia is the world’s largest exporter of gas in terms of volume, accounting for nearly half of the EU’s imports in 2021. For Germany, Europe’s largest economy, that figure stood at 55 percent last year. And although Germany’s gas imports from Russia dropped to 40 percent in the first quarter of 2022, economy minister Robert Habeck has said his country will not achieve full independence from Russian supplies before mid-2024.
Here’s what to know about Germany’s decision to sound the first official alarm about gas supplies.
What is the issue?
Russia said last week it would draw up a mechanism by March 31 under which the “unfriendly countries” would pay for gas in roubles. Most now pay in euros or United States dollars. Moscow is expected to unveil new rules for gas payments on Thursday.
Habeck has rejected Russia’s gas-for-roubles demand, saying contracts would be honoured under current terms.
“Payment in roubles is not acceptable and … we call on the companies concerned not to comply with Putin’s demand,” he said on Monday.
Russia’s biggest German customers are Uniper, RWE and EnBW’s VNG, which all have long-term gas supply contracts. They have not commented on questions about individual preparations for any disruption.
French President Emmanuel Macron has also rejected Russia’s demand, saying it “is not in line with what was signed, and I do not see why we would apply it”.
Habeck said on Wednesday Germany’s gas storage is currently filled to about 25 percent capacity.
“The question how long the gas will last basically depends on several factors [such as] consumption and weather,” he said. “If there’s a lot of heating, then the storage facilities will be emptied.”
What is Berlin’s emergency plan?
Germany’s “Emergency Plan Gas” has three crisis levels detailing ways to conserve gas, secure supplies and make sure households have adequate amounts of fuel.
The first level, which the government has triggered, is the “early warning” when there are signs a supply emergency could develop.
“We are in a situation where, I have to say this clearly, every kilowatt-hour of energy saved helps,” said Habeck, who is also Germany’s energy minister and vice-chancellor. “And that’s why I would like to combine the triggering of the warning level with an appeal to companies and private consumers to help Germany, help Ukraine, by saving gas or energy as a whole.”
The second warning level is “alarm”, when a disruption to supply or extraordinarily high demand upsets the usual balance but can still be corrected without full-state intervention, requiring companies in the gas industry to take necessary measures to direct supply.
The third level is “emergency”, when market-based measures have failed to remedy shortages. At this stage, Germany’s network regulator, the Bundesnetzagentur, must decide on how to distribute remaining gas supplies across the country to ensure that those who need it most – such as hospitals and private households – receive it.
“We’re not there and we don’t want to go there,” he added.
What will be the effect?
If the government does not secure enough gas, industry, which accounts for a quarter of German gas demand, will be hit first.
“This means that industrial production gets lost, that supply chains get lost,” Leonhard Birnbaum, chief executive of German energy group E.ON, told public broadcaster ARD.
“We are certainly talking about very heavy damages.”
Private households will have priority over industry, while hospitals, care facilities and other public sector institutions with special needs would be last to be affected by a disruption.