Putin has decided that the euro and USD just will not work for Russian natural gas.
In effect he is saying pay with roubles & /or gold or freeze in the dark.
Italy and Germany are at a real risk to this. Russia can simply shut the valves on the NG pipelines and these countries get cold and dark quickly. (Think MasterBlaster saying "Who run bartertown?")
https://finance.yahoo.com/news/germany-triggers-emergency-plan-secure-071358469.html
QuoteEurope's largest economy, which relies on Russia for more than 50% of its natural gas, initiated the first of three phases of the plan, signaling there are serious signs the supply situation may deteriorate, Economy Minister Robert Habeck said Wednesday. The announcement comes as the Kremlin plans to tell European energy companies by Thursday how to pay for fuel in the Russian currency, even if the process of switching won't begin immediately.
European countries from Germany to Italy have labeled the request a breach of contract and the standoff between Europe and Russia is threatening to upend energy markets. European gas prices surged as much as 15% after the German announcement, before easing as the Kremlin said it would take time before companies need to pay in rubles. German industries from steel to chemicals would shut down within a matter of weeks if Russia supplies were cut off.
https://finance.yahoo.com/news/putin-explained-italys-draghi-pay-162708795.html
QuoteRussia has said that, because of Western financial sanctions over Ukraine, it plans to require payment for its energy exports in roubles rather than the usual euros or dollars.
Italy is heavily dependent on Russian gas, and Draghi had previously rejected this. The statement from his office did not say what his response was to Putin's description of how it would work.
Even if Russia abandons Ukraine they can continue this requirement of gold &/or roubles long after.
They are intent on damaging the euro and USD and at the same time take the gold reserves in a commodity swap. Note that Germany and Italy are the two largest European gold reserves.
https://tradingeconomics.com/country-list/gold-reserves
I am not a gold bug...far from it. However this is IMO a very interesting development for gold. Russia could have launched a new or used an existing cryptocurrency. They did not. They instead chose gold and the rouble.
https://www.marketwatch.com/story/russia-just-made-a-case-for-owning-goldand-nobody-noticed-11648415950
QuoteBut a look at the transcript being reported shows something quite different. Zavalny added bitcoin only at the end of a long list of other currency and trading options, almost as an afterthought.
SNIP
Much more interesting was Zavalny's main point, even though it has been mostly overlooked. If other countries want to buy oil, gas, other resources or anything else from Russia, he said, "let them pay either in hard currency, and this is gold for us, or pay as it is convenient for us, this is the national currency."
(Note my emphasis in bold. The national currency means the rouble or anything except the USD or euro.)
https://www.kitco.com/news/2022-03-28/Russia-sets-fixed-gold-price-as-it-restarts-official-bullion-purchases.html
QuoteStarting this week, the Russian central bank will pay a fixed price of 5,000 roubles ($52) per gram between March 28 and June 30, the bank said on Friday. This is below the current market value of around $68.
The central bank added that the resumption in buying will ensure supply and uninterrupted production of local gold.
Two weeks ago, Russia's central bank announced that it was halting its official gold purchases from local banks due to a surge in demand from regular consumers.
This is because Russians went on a gold buying spree in March to protect their savings as the ruble collapsed. Major banks in Russia reported a rush of consumers investing in bullion and coins.
So what does this mean? Right now not a lot except for Europe. It means they will either have to prepay in gold or live in cold & darkness...I think we all know the answer at least short term.
Interesting times in which we live.
It is concerning.
We are going to get Solar Panels installed on some of our farm sheds ( we can claim VAT back in agricultural solar panels) We decided to do so when Russia invaded Ukraine. They are to have a battery back up to store energy for when there's not enough sunlight, which is a common occurrence in Ireland.
It'll mostly be to save on our Electricity bill, but also we want to be able to heat water without using our oil burner in the summer.
When we built our extension in 2016/2017 we installed under floor heating, we've no log burner or wood stove in it which now seems like a mistake. So if worst comes to worst we'd have to use the fireplace in the small parlour at the front of the old bit of our house. We've bags and bags of firewood that is from the trees and tree branches that have been blown down in storms. It's far from ideal as an open wood fire doesn't burn for long and needs regularly topped up.
I wish that I could put solar up here at my house, but I've got too many trees, both on my property and on all the surrounding neighbors' property as well. I've been thinking about getting my house prepped for sale so that I can buy somewhere that addresses a few insurmountable issues at my current place (limited sun for gardening or solar, very steep/narrow stairs to 2nd floor, close to very bad areas, detatched garage, etc.). Being able to install solar (and to grow a garden) are high on the list of features that I want at a new place! I've been keeping an eye out for potential houses, just to stay abreast of the current market and even with all the housing craziness, I've seen a few which would meet my needs and which I could actually afford. Right now I'm thinking of holding off for 1-2 years and then maybe starting to look.
I have picked up a foldable 100w solar panel that I can use to recharge devices or power banks and I bought a single 100w Renogy mono-crystalline panel which will be going onto my truck (I'll post some truck updates in the near future), but that's about it for solar right now. I do get just enough sun to use some solar landscape lights and a solar motion light on the south side of my house.
One upgrade which would help to reduce my energy needs would be to replace my 40 year old furnace. The current one works fine, it's just old/inefficient, and the payback on a new one would be 6-8 years. If I end up moving, that would likely be money down the drain (due to it's age, my house would likely be classified as a "fixer upper" without me investing a ridiculous amount of money into it).
Quote from: wee drop o bush on April 01, 2022, 11:32:25 AM
It is concerning.
We are going to get Solar Panels installed on some of our farm sheds ( we can claim VAT back in agricultural solar panels) We decided to do so when Russia invaded Ukraine. They are to have a battery back up to store energy for when there's not enough sunlight, which is a common occurrence in Ireland.
It'll mostly be to save on our Electricity bill, but also we want to be able to heat water without using our oil burner in the summer.
When we built our extension in 2016/2017 we installed under floor heating, we've no log burner or wood stove in it which now seems like a mistake. So if worst comes to worst we'd have to use the fireplace in the small parlour at the front of the old bit of our house. We've bags and bags of firewood that is from the trees and tree branches that have been blown down in storms. It's far from ideal as an open wood fire doesn't burn for long and needs regularly topped up.
The good news for the UK (& Norway) is that the North Sea still has very active natural wells that should buffer any Russian NG supply disruption. Their production is declining but it still is more than adequate for domestic needs.
A wood fired water boiler could be retrofitted relatively easily (I did not say cheap) IF you can easily tap in the existing hydronic radiant floor heating system. You are in effect attaching a hot water hose to the system.
https://www.ecoangus.co.uk/wood_burning_boiler.html
Still you need power for these to work.
A simple wood stove might be an easier solution.
https://www.homedepot.com/p/US-Stove-Logwood-900-sq-ft-2020-EPA-Certified-Cast-Iron-Wood-Burning-Stove-US1269E/313268587
An update today is the first of the month and Russia is still pricing its NG in euros and USD. That could change.
Despite my disdain for the news source in this instance I think the analysis and opinion it is taking is valid.
https://www.cnn.com/2022/04/01/business/russia-gas-ruble-ultimatum-explainer/index.html
QuoteWhat happens next?
Although the risk of a disruption to European supplies has increased, Russian gas was still flowing westwards on two of the three main pipelines on Friday, Reuters reported.
The Kremlin said payments for gas being delivered now would fall due towards the end of the month or the beginning of May, which is why Russia hadn't immediately shut off the flow of gas to Europe.
"I received many questions about whether this means that if there is no confirmation in rubles, would it mean that gas supplies will be cut off from April 1? No, it doesn't, and it doesn't follow from the decree," Peskov told reporters.
Gazprom would work with its customers to implement the new rules, Peskov said, adding that the ruble mandate could be reversed.
"Absolutely. If other conditions come up," he said.
Russia needs the money from its energy exports more than ever, given the havoc sanctions have wreaked on others parts of its economy. Analysts say Russian GDP could shrink by about a fifth this year. And it couldn't easily sell natural gas to other countries, such as China, because the pipeline infrastructure doesn't yet exist.
Moscow's decision to publicly threaten to turn off the taps could backfire by adding ever greater urgency to efforts to break Europe's addiction to Russian energy. EU officials have already set a target of cutting Russian gas use by 66% this year. Germany is building terminals to import liquefied natural gas, US shipments are being ramped up, and Europe is accelerating renewable energy projects.
"Given the EU's ambition to replace a majority of Russian imports with alternative suppliers by the end of the year, it seems likely that most if not all European buyers will opt not to renew supply deals," the Eurasia analysts wrote.
"Europe's gradual shift away from Russia's energy supplies is structural, and will not be reversed."
FWIW Russia needs the cash in euros and USD short term due to the sanctions. If they wanted to they could simply turn off the NG. Clearly they do not want to do that and use the commercial terms argument as the reason not to do so.
This ultimatum should be a huge wakeup call for Europe.
Europe cannot replace such a high level of energy imports quickly.
It takes a decade to build new power plants. Germany is already scheduled to shut down the 3 oldest nuke plants because they need refueling and refurbishment. This plan assumed that NG would take up the slack...Russian NG.
There is not a lot of maneuvering room here for Germany or Italy.
My guess is that both parties will make a lot of noise and posture for the public but in the end the seller needs the money as much as the buyer needs the product. So the EU will say tell Russia that they have to take their euros and claim that they stood up to the blackmailer and that means they now have in effect permission to ignore the financial restrictions they helped impose.
They save face and do not look hypocritical.
Russia was able to make its debt payments by tapping its domestic USD reserves to pay USD denominated bonds.
https://www.irishexaminer.com/business/economy/arid-40864247.html
QuoteThe transfer of the $650m (€618m) had got tangled up in the wide-ranging sanctions imposed after the invasion of Ukraine. And despite the 11th-hour escape before a Wednesday deadline to get the funds to creditors, Russia could face bigger hurdles within weeks that scupper future payments.
For now, it appears money is getting through. Three investors said their custodian banks had received payments, asking not to be identified discussing private transactions. Major international clearing houses have received and processed payments for the eurobonds due in 2022 and 2042, according to people familiar with the situation.
The bond controversy kicked off when the payments from US accounts were blocked by the US Treasury in early April. Russia tried to pay in roubles, but that was deemed a breach of contract, leading to legal threats from Moscow, warnings from ratings firms and an apparent one-way path to default.