Home Business Vladimir Putin threatens to cut off gas supplies

Vladimir Putin threatens to cut off gas supplies


Russian President Vladimir Putin demanded last week that countries qualifying as“unfriendly”, i.e. which have adopted sanctions, pay for their gas purchases in roubles, and no longer in dollars or euros as provided for in the contracts. And this Thursday, March 31, he signed the decree authorizing Russia to cut off deliveries to countries that refuse to comply with this requirement.

→ ANALYSIS. War in Ukraine: France is preparing for the end of Russian gas

“If payments are not made in rubles, it will be considered a breach of obligations on the part of the buyer, and this will have all the necessary consequences”, he explained on television. To be sure that he had been understood correctly, he stated that in the event of a refusal, “ongoing contracts will be stopped”.

The G7 responds “niet”

The Kremlin kept blowing hot and cold on this subject. On Wednesday March 30, the Kremlin spokesman indicated that payment in rubles would be implemented gradually.

Faced with this requirement, several European countries, including France, Italy and Germany have indicated their refusal to pay in rubles. Meeting on Monday, the G7 countries spokeone voice : “All G7 Ministers agreed that this was a unilateral and clear breach of existing contracts (…)payment in rubles is not acceptable”, said Robert Habeck, German Minister for Economics and Climate Protection, after the meeting.

Olaf Scholz confirmed this position on Thursday March 31. “It is written in the contracts that payments are made in euros and sometimes in dollars”, explained the German Chancellor during a press conference with his Austrian counterpart, Karl Nehammer. “I made it clear to the Russian president that it would stay that way” and “companies want to be able to pay in euros and will do so”.

Payment in rubles would mean that Russian gas customers would have to open an account with Russian banks, despite being under sanctions, to buy Russian currency.

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→ UNDERSTAND. War in Ukraine: do without Russian gas, the European puzzle

In order for Russia to receive its payments in a new currency, it would be necessary, in law, to change the terms of existing agreements. “It is impossible to unilaterally modify a contract, explains Élodie Valette, associate lawyer at Bryan Cave Leighton Paisner (BCLP). For this, we need an agreement from all parties..

Several years of litigation

What would be the legal recourse in the event that Russia actually carried out its threat to cut off its supplies? Contracts provide terms and conditions. An arbitration tribunal may be appointed to settle the dispute. Certain organizations, such as the International Chamber of Commerce, can also be seized to take emergency measures, such as obliging the parties to continue the performance of the contract, until the court renders its decision.

“The emergency measures could be put in place quickly, but it would take several years for the dispute to be finally settled with the arbitration tribunal, adds Élodie Valette. Until these clauses are implemented, the Western side would no longer receive gas and the Russian side would no longer receive payment. »

Is referring to contracts pointless? “In the short term, the law is not very effectivecontinues Élodie Valette. But this path must be taken because it is also a means of pressure for the Europeans. Behind the respect of contracts, there is the question of trust, necessary for the maintenance of long-term commercial relations. »

78% of Russian gas exports go to Europe

Russia exports 78% of its gas to the European Union, which earns it between 200 and 600 million euros every day, according to figures from Reuters. And if it can turn to Asia in the long term, its energy infrastructures do not immediately allow it to redirect this production outside the European Union.

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→ EDITORIAL. Gas: toxic dependence

On the other hand, 45% of European gas imports come from Russia. The dependence varies according to the country (55% for Germany before the beginning of the war, against 11% for France). And if the Twenty-Seven have already shown their ambition to do without two thirds of their Russian supplies by the end of the year, they would have to wait until 2027 to completely get out of their dependence on Russian gas.

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