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Putin demands gas exports to be paid in rubles, and US SPR release

In this interview with BBC World News, Dr Carole Nakhle, CEO of Crystol Energy, assesses President Putin’s threat to halt gas exports if payments are not made in ruble.

Dr Nakhle argues that while we tend to focus on Europe’s dependence on Russian gas, interdependence cuts both ways as Russia depends equally or even more on the European market primarily for its pipeline gas. Europe has more options to source its gas from other exporters than only a few years ago. It has built LNG infrastructure to support its import diversification strategy, but it will take time to fully replace Russian gas.

While Russia is exploring other markets, especially Asia, its export infrastructure geared towards those markets is not as developed as in Europe. If Russia cuts its gas supplies to Europe, it will send the wrong message to its potential customers in Asia, particularly China. This will be a reputational risk that Russia is going to face should it cut its supplies.

Dr Carole Nakhle assessing President Putin’s threat to halt gas exports if payments are not made in ruble.

On whether the threat that Russia will cut off its supplies is serious or not, Dr Nakhle explains that we can’t rule out this scenario, but this will incur the loss of significant revenues for Russia. Meanwhile, Europe will accelerate its search for new suppliers. On balance, even though Europeans will suffer in the short term, Russia will be the biggest loser in the longer term. 

On Biden’s decision to release 180 million barrels of Strategic Petroleum Reserve (SPR) over the course of six months, Dr Nakhle says that this equates to the production of the United Kingdom’s daily output which is significant by all measures. The US President has been calling on OPEC since last year to put additional barrels in the market, but the latter has been defiant and stubborn and they have stuck to the additional 400,000 barrels per day. Biden even sent officials to Venezuela and tried to push the nuclear deal with Iran but has failed to achieve tangible results to this date. For these reasons, he has decided to release a volume from the SPR with the hope of easing the pain on American consumers when they are at the pump, as his popularity suffers.

Related Analysis

Energy Markets and the Design of Sanctions on Russia“, Christof Rühl, Mar 2022

No endgame for Ukraine“, Christof Rühl, Feb 2022

Related Comments

Energy crisis: Economic and political ramifications“, Dr Carole Nakhle, Mar 2022

Energy Market Dynamics“, Dr Carole Nakhle, Mar 2022

The EU’s 4th round of sanctions on Russia“, Dr Carole Nakhle, Mar 2022

Can Europe completely cut its reliance on Russian energy supplies?“, Dr Carole Nakhle, Mar 2022

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