Russia’s Gas Revenue May Top $100Bln as Moscow Wins ‘First Round’ Of ‘Energy Battle’ - French Media

After Russia launched its special military operation in Ukraine, the US and its allies slapped sanctions on Moscow while issuing calls to reduce dependence on Russian energy resources. The move exacerbated a situation where gas prices were already soaring, and prompted Russia to demand that “unfriendly countries” pay for its gas exports in rubles.

Russia may receive a record $100Bln for gas supplies to Europe this year against the backdrop of surging prices for the fuel, claims a columnist for French newspaper Les Echos, citing data from Citi analysts.

Despite “sanctions, aggressive statements and promises of an embargo,” Vincent Colin pointed out that EU member-states funnel $200Mln of payments to Gazprom each day.

“Thanks to the surge in prices, Russia should receive $100Bln for gas delivered to Europe this year, which is almost twice as much as in the past, when prices were already high. And this is without taking into account revenues from oil, coal and other raw materials,” the journalist said.

According to Colin, Russia has “won the first round” of the “energy battle” that was unleashed after the US and its allies slapped it with sanctions over the Ukraine crisis.

Even if the EU starts buying less gas, the jump in prices will compensate for the drop in orders, the report insisted. Such profits reaped by Gazprom, according to Colin, have already covered the costs of laying the Nord Stream 2 gas pipeline.

Nord Stream 2, running from the Russian coast through the Baltic Sea to Germany, and with a total annual capacity of 55 billion cubic metres of gas was completed in September 2021.

As it was about to be launched and was awaiting regulatory approvals, primarily from Germany's authorities, certification was suspended in late February after Russia recognised the sovereignty of the Donetsk and Lugansk People’s republics. German Foreign Minister Annalena Baerbock said at the time that the project was "effectively frozen".

The US Treasury Department on 23 February also imposed sanctions on the project operator of Nord Stream 2 AG and its managing director Matthias Warnig.

Colin also weighed in on the European Union's threats to go further than its current pledge to dramatically reduce the 27-nation bloc's dependence on Russian oil, gas and coal.

By “threatening the embargo, but not taking any action, the Europeans fell into a trap,” he said.

In early March, the EU, which gets about 40 percent of its natural gas from Russia, announced plans to slash its dependence on Russian by two-thirds during 2022.

After the US and Britain banned Russian oil in March, European Commission President, Ursula von der Leyen, on 4 May proposed a sixth package of sanctions, which needs to be unanimously approved by member states to take effect. Among other things, it presupposed banning Russian oil imports. However, countries such as Hungary and Slovakia requested exemptions after saying they were not ready to switch their energy supplies so soon.

Hungarian Prime Minister Viktor Orban warned that cutting off Budapest’s access to Russian energy would be equivalent to dropping an “atomic bomb” on the central European nation’s economy. These concerns were echoed by German industrial leaders as well.

Furthermore, in response to sanctions, Russia’s President Vladimir Putin issued a decree requiring gas deliveries to “unfriendly” nations to be paid in rubles.

In late April, Gazprom’s press service announced that the company had suspended gas supplies to Poland and Bulgaria because of their resistance to paying in ubles. The two countries were cited by Colin in his analysis of the situation.

“A good example is Poland and Bulgaria. These two countries will no longer buy from Gazprom, because they refused the new ruble settlement system that Putin demanded. Bad news for Russia? Not at all! Because, by turning off the taps, the owner of the Kremlin showed that he is ready to carry out his threats,” wrote the French analyst.

Approximately half of Russia’s 54 gas importers have opened ruble accounts with Gazprombank in compliance with Moscow’s newly introduced payment rules, said the country's Deputy Prime Minister Alexander Novak on 19 May.

“In the days ahead we will see the final list of those who paid in rubles and those who refused to pay,” Novak said, adding that all the larger companies have opened accounts, paid for supplies or are ready to pay when they are due.