Russia's Gazprom cutting off some natural gas to Germany after Shell refused to pay in roubles

Business Insider US
Russian President Vladimir Putin has demanded ruble payments for the country's natural-gas supply.
  • Gazprom said it would halt its natural-gas supply to Shell, which supplies Germany.
  • The suspension from June 1 is due to Shell's refusal to pay for supplies in rubles, Gazprom said.
  • On March 31, Russian President Putin demanded natural gas payments be made in rubles.
  • For more stories visit Business Insider.

Russian energy-giant Gazprom is set to halt its natural-gas supply to Shell, which supplies fuel to Germany, Europe's largest economy. The move comes after Shell refused to pay Gazprom in rubles.

Gazprom made the announcement on Tuesday — the same day it cut off natural-gas supplies to the Netherlands for the same reason.

In a March 31 decree, Russian President Vladimir Putin demanded that natural-gas payments be made in rubles, which would entail opening a euro and ruble account with Gazprombank in Moscow to process payments.

Shell Energy Europe has notified Gazprom "it does not intend to make payments under the contract for the supply of gas to Germany in rubles," Gazprom said in its Telegram channel.

"As of the end of the business day on May 31 (the payment deadline stipulated by the contract), Gazprom Export had not received payment from Shell Energy Europe Limited for gas supplies in April," the Russian company wrote.

"Gazprom Export notified Shell Energy Europe Limited of the suspension of gas supplies under this contract from June 1, 2022" — until payment is made in rubles, the Russian company continued.

Gazprom supplies up to 1.2 billion cubic meters of natural gas a year to Shell. That's just 2.6% of the 95 billion cubic meters of natural gas Germany consumes each year, according to the country's economy ministry. 

While Shell has refused to pay Gazprom in rubles, Germany's major natural-gas importers Uniper and DWE have paid for Russian fuel under Moscow's new payment plan, Reuters reported on Tuesday.

Uniper is the largest importer of Russian gas in Germany. It depends on Russia for more than half of its natural-gas needs, according to Bloomberg. The German energy giant is also the country's largest gas import and storage company, per the media outlet.

Potential for a 'significant recession'

Germany could fall into a "significant recession" if supplies of Russian natural gas and oil are cut off, a top banker said in April. The economic powerhouse is heavily reliant on Russian gas, which accounted for 55% of Germany's gas imports in 2021 and 40% of its gas imports in the first quarter of 2022, Reuters reported. 

Germany's economy ministry did immediately not respond to Insider's request for comment sent outside regular business hours. A spokesperson for the German government told CNN on Tuesday it was "monitoring the situation very closely." 

Shell did not immediately respond to Insider's request for comment but told Reuters it "has not agreed to new payment terms set out by Gazprom." The energy giant has also not opened any special accounts to process the ruble payments.

"We will work to continue supplying our customers in Europe through our diverse portfolio of gas supply," Shell added to Reuters.

On Tuesday, Gazprom said it has fully suspended gas supplies to GasTerra due to the Dutch trader's "failure to pay in rubles."

In neighboring Denmark, power company Orsted is also warning about a Gazprom natural-gas supply cut as it, too, is refusing to pay in rubles. Orsted's ruble payment was due on Tuesday.

Gazprom has already cut off gas supply to Poland, Bulgaria and Finland, as they have all refused to pay in the Russian currency.

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