For Not Paying in Rubles: Gazprom turned the Tap Off for Shell in Germany and Orsted in Denmark

Energy | June 1, 2022, Wednesday // 09:10|  views

Russia's Gazprom announced on Tuesday that it was suspending gas supplies to the Danish company Orsted and Shell Energy under its gas supply contract with Germany. The reason is the refusal to pay for the raw material in Russian rubles, Reuters reported.

The Russians explained that they had not received the expected payment by May 31 in the Kremlin's manner. The official shutdown of the gas will take place on Wednesday, June 1. According to the agency, the contract with Shell Energy provided for gas supplies of 1.2 billion cubic meters per year by 2031.

The Financial Times describes Gazprom's decision on Shell's German supplies as the first formal suspension of Russian gas to Germany. Earlier, two other suppliers - Uniper and Germany's largest operator ERW, agreed to pay on Russian terms in rubles. Although the payments were formally in euros, after opening an account with Gazprombank, they were converted into rubles. Shell, according to the Financial Times, does not have such an opportunity because the company "moved" to the UK earlier this year. The UK, unlike the EU, has also imposed sanctions on Gazprombank, making it impossible to circumvent the sanctions system, as is the case with other operators.

A statement from Orsted said that the reason for Gazprom's suspension of the contract was the Danish side's refusal to pay in rubles. "In our opinion, it is Gazprom that is not fulfilling its obligations under the contract, we are obliged to pay in euros," said CEO of Orsted Mads Nipper.

According to Nipper, the company was "preparing for a possible suspension of gas supplies from Gazprom." Gas storages should be 80 percent full this year and 90 percent next year.

According to Danish media, the suspension of Russian gas will primarily mean an increase in the price of this raw material. People who heat their homes with gas boilers will suffer in the first place.

In the longer term, Denmark plans to increase its own gas production in the North Sea, as well as the production of energy from renewable sources, mainly through offshore wind farms.

On Tuesday, Gazprom also announced that it had completely cut off supplies to the Dutch GasTerra, which also refused to pay for natural gas in rubles.

According to Russia's Kommersant, after the shutdown of natural gas for Bulgaria, Poland, Finland, and companies from the Netherlands, Germany and Denmark, Gazprom's contractual portfolio will lighten by 27.7 billion cubic meters per year.

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Tags: Danish, German, Russian, gas, rubles


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