Russian gas giant halts shipments to Europe through key pipeline after German CEO warns of impending economic "catastrophe"
"Economic fallout between Russia and the rest of Europe worsened on Saturday after a Russian energy giant decided to cut off natural gas to the continent that flowed through a major pipeline.
The action by Gazprom to shut down the Yamal-Europe pipeline, a crucial artery for energy flows, came just a day after European countries imported the most liquified natural gas (LNG) from Russia that they had in months, apparently in an attempt to stock up on the commodity
ahead of a deadline imposed by President Vladimir Putin to either pay for their purchases in rubles or be completely cut off.
... Goldman Sachs energy industry researchers have already shown that U.S. exports of the commodity are already at current capacity, so no additional supplies will be forthcoming.
... LNG must be very carefully processed and then “regassified” before it can then be sent to utility companies and other energy distributors.
The charts above illustrates the level of dependence that various European economies have on Russia:
... In addition to Germany now having to deal with dramatically reduced supplies of Russian gas, British energy giant Shell has also been cut off from Moscow’s supplies in response to the United Kingdom’s economic sanctions on Russia, according to Dmitry Peskov, Putin’s press secretary.
... European nations ... face a “catastrophic” economic crisis as energy prices soar, leading to rationing, blackouts and other measures that will make the 1970s oil crisis in the US look like child’s play." ...
German chemical behemoth warns of country's "total collapse" if Russian oil, gas is cut off
... "The U.S. and other Western nations have imposed sanctions on the purchase of Russian oil and gas, but not all European nations are keen to do that so quickly without being assured they can obtain supplies elsewhere.
That said, the Germans are increasingly skittish about simply dropping Russian gas, and with good reason:
Without it, the country’s economy is liable to collapse completely, according to the CEO of Germany’s multinational BASF SE, Martin Brudermuller -- BASF is the world’s largest producer of chemicals.
... the Kremlin appears committed to President Vladimir Putin’s demand that “unfriendly countries” settle their energy payments in rubles, the Russian currency, following Western sanctions.
While he suggested that “Germany could be independent of Russia gas in four to five years,” for now, Brudermuller conceded, “LNG imports cannot be increased quickly enough to replace all Russian gas flows in the short term.”
In the meantime, Brudermuller said “it’s not enough that we all turn down the heating by two degrees now,” since “Russia covers 55 percent of German natural gas consumption.”
He explained forcefully that if Moscow’s gas flows disappeared overnight, “many things would collapse here” since “we would have high levels of unemployment, and many companies would go bankrupt. This would lead to irreversible damage.”
“To put it bluntly: This could bring the German economy into its worst crisis since the end of the Second World War and destroy our prosperity,” Brudermuller continued.
“For many small and medium-sized companies, in particular, it could mean the end. We can’t risk that!”
... “A delivery stop for a short time would perhaps open the eyes of many — on both sides. It would make clear the magnitude of the consequences. But if we don’t get any more Russian gas for a long time, then we really have a problem here in Germany,” he noted.
“At BASF, we would have to scale back or completely shut down production at our largest site in Ludwigshafen if the supply fell significantly and permanently below 50 percent of our maximum natural gas requirement ... "
'Rublegas:' the world's new resource-based reserve currency
Saddam, Gaddafi, Iran, Venezuela – they all tried but couldn’t do it. But Russia is on a different level altogether.
... Russian President Vladimir Putin’s presidential decree on new payment terms for energy products, predictably, was misunderstood by the collective west. The Russian government is not exactly demanding straightforward payment for gas in rubles. What Moscow wants is to be paid at Gazprombank in Russia, in its currency of choice, and not at a Gazprom account in any banking institution in western capitals.
That’s the essence of less-is-more sophistication. Gazprombank will sell the foreign currency – dollars or euros – deposited by their customers on the Moscow Stock Exchange and credit it to different accounts in rubles within Gazprombank.
What this means in practice is that foreign currency should be sent directly to Russia, and not accumulated in a foreign bank – where it can easily be held hostage, or frozen, for that matter.
All these transactions from now on should be transferred to a Russian jurisdiction – thus eliminating the risk of payments being interrupted or outright blocked.
Gazprom made things easier this Friday,
sending official notifications to its
counterparts in the west and Japan.
Putin himself was forced to explain in writing
to German Chancellor Olaf Scholz how it all works.
Customers open an account with Gazprombank in Russia.
Payments are made in foreign currency – dollars or euros – converted into rubles according to the current exchange rate, and transferred to different Gazprom accounts.
Thus it is 100 percent guaranteed that Gazprom will be paid.
That’s in stark contrast to what the United States was forcing the Europeans to do: pay for Russian gas in Gazprom accounts in Europe, which would then be instantly frozen. These accounts would only be unblocked with the end of Russia’s military ops in Ukraine.
... Gazprom accounts in Europe would continue to be frozen.
... he new rubles-for-gas mechanism does not in any way violate existing contracts. Yet, as Putin warned, existing contracts may indeed be stopped: “If such [ruble] payments are not made, we will consider this to be the buyers’ failure to perform commitments with all ensuing implications.”
Kremlin spokesman Dmitri Peskov (said) this does not mean that the gas flow would be instantly cut off. Payment in rubles will be expected from ‘The Unfriendlies’ – a list of hostile states that includes mostly the US, Canada, Japan and the EU – in the second half of April and early May.
... This gas-for-rubles mechanism – call it Rublegas – is just the first concrete building block in the construction of an alternative financial/monetary system, in tandem with many other mechanisms:
ruble-rupee trade; the Saudi petroyuan;
the Iran-Russia SWIFT- bypassing mechanism; and
the most important of all, the China-Eurasia Economic Union (EAEU) design of a comprehensive financial/monetary system, with the first draft to be presented in the next few days.
And all of the above is directly linked to the
stunning emergence of the ruble as a new,
resource-based reserve currency.
... The EU depends on steady supplies of Russian gas (40 percent) and oil (25 percent).
... Natural gas accounts for 50 percent of the needs of Germany’s chemical and pharmaceutical industries. There’s no feasible replacement, be it from Algeria, Norway, Qatar or Turkmenistan.
Germany is the EU’s industrial powerhouse. Only Russian gas is capable of keeping the German – and European – industrial base humming and at very affordable prices in case of long-term contracts.
Food prices in Germany to increase by 20-50% amid conflict in Ukraine
"History is repeating itself in Germany,
where Weimar-style hyperinflation
is banging at the nation’s doors.
... The German Retail Association (HDE) is warning that consumers need to prepare for price hikes on everyday goods of anywhere from 20 to 50 percent in the coming days. This will affect even discount grocers such as Aldi, Edeka and Globus. (The 20% to 50% is hard to believe unless it really means "Up to 20% to 50%" Ye Editor
Before the Ukrainian invasion, prices had already risen in Germany by about 5 percent “across the product range” due to skyrocketing energy prices. After the invasion, the supply chain took an even greater hit, according to HDE President Josef Sanktjohanser.
“The second wave of price increases is coming, and it will certainly be in double figures,” Sanktjohanser told The Local.
“We will soon be able to see the impact of the war
reflected in price labels across all the supermarkets.”
Aldi announced that meat and butter
at its German stores will be “significantly
more expensive” due to price hikes from its suppliers.
... Previously, Aldi raised prices on about 160 different items, followed by another 20 more a week after that. Other supermarket chains quickly followed suit.
“As previously noted, German supermarkets have even started limiting the purchase of cooking oils and flour in particular to prevent a mad rush to stock up on items that customers believe will run out. In other words, limit the sale of those products which are in highest demand, also known as a ‘brilliant strategy.'”
... “All of this suffering is because ‘Ukraine refuses to be neutral,'” suggested another. “I can see a world where the citizens of all countries stand up and say ‘no more’ to sanctions and support.”
