Of course they are. Germany and its chancellor Olaf Scholz keep talking about “Zeitenwende,” a supposed shift in policy that promises to end reliance on cheap Russian energy and a firmer commitment to investment in common security in Europe. Talk is cheap, however, when Russian energy is cheap, and it’s getting cheaper now that Vladimir Putin is getting desperate.
Cheaper in rubles, that is. It’s still drenched in Ukrainian blood, if anyone in Germany and Austria cares:
Gas distributors in Germany and Austria told CNN Business that they were working on ways to accept a Russian ultimatum that final payments for its gas must be made in rubles, while complying with EU sanctions.
President Vladimir Putin said last month that “unfriendly” nations would have to pay rubles, rather than the euros or dollars stated in contracts. Buyers could make euro or dollar payments into an account at Russia’s Gazprombank, which would then convert the funds into rubles and transfer them to a second account from which the payment to Russia would be made.
Germany’s Uniper said on Thursday it would continue to pay for Russian gas in euros but added that it believes a “payment conversion compliant with sanctions law” is possible.
“Uniper is in talks with its contractual partner about the concrete payment modalities and is also in close coordination with the German government,” the company said in a statement.
A Uniper spokesperson told newspaper Rheinische Post on Thursday that the company would make payments into a Russian bank in euros, instead of a bank based in Europe.
Reuters also reports that Uniper wants to accommodate Putin, having been spooked by the shutoff in Poland and Bulgaria:
Uniper (UN01.DE) will transfer payments for Russian gas to a Russian bank and no longer to a Europe-based bank, the German power utility told newspaper Rheinische Post on Thursday.
“The plan is to make our payments in euros to an account in Russia,” the daily paper cited a Uniper spokesperson as saying.
Even though Russia has demanded rouble payments for its gas, the payments system it has proposed foresees the use of accounts at Gazprombank, which would convert payments made in euros or dollars into roubles.
To be fair, the EU opened up this strategy by identifying a loophole last week:
The European Commission said last week that if buyers of Russian gas confirmed payment was complete once they had deposited euros, as opposed to later when the euros have been converted to roubles, that would not breach sanctions.
Nothing says “resolve” like rushing to give official workarounds to deterrence sanctions. If the European Commission makes those kinds of avoidance strategies public, it certainly makes it tougher for member-states to show firmness in dealing with Putin.
Of course, Poland and Bulgaria managed to do so this week. As my friend Olivier Knox notes at the Washington Post from a Financial Times report, they don’t appear to be looking for escape hatches either, despite being less able to withstand the economic and social shocks that might come:
Polish Prime Minister Mateusz Morawiecki … denounced Moscow’s “gas imperialism” but insisted “we have been preparing for this moment for years.”
“From the autumn, Poland will not need Russian gas at all. We will cope with this blackmail, with this gun to our head, in such a way that Poles will not feel it,” the FT reporters quoted him as saying.
“Poland imported 45 per cent of its gas from Russia in 2020 under a long-term contract with Gazprom. But the contract expires at the end of this year, and Poland has spent the past few years investing in infrastructure that will allow it to cope without Russian gas,” they reported.
Olivier believes that Putin’s insistence on payment in rubles, not to mention his refusal to end the invasion of Ukraine, will backfire on him in the long run. It’s not yet backfiring, however:
Two months ago, Putin’s new war suddenly welded NATO in the kind of unity the alliance has sometimes struggled to muster since the end of the Cold War, and added prospects for new members like Sweden and Finland, an outcome he surely would hate.
Now his energy gambit also seems counterproductive over the longer term, as Europe seems suddenly willing to act on long-standing concerns its dependence on Russia means it must mute its objections to Kremlin policies or face economic pain at home. …
“Despite a U.S. embargo on oil, gas and coal, and the European coal embargo, Russia is still making about as much money from fossil fuel sales as it was making before the invasion, according to estimates by the Wednesday Group, a team of experts tracking Russian energy sales. That amounts to about $1 billion a day, and possibly $1.5 billion a day, in revenue.”
That … gives me pause.
Me too, although I agree that a firm resolve across the EU to end Russian energy imports will eventually cripple Putin. Poland and Bulgaria are demonstrating it. Germany and the European Commission look more interested in Zeitenunwinde than Zeitenwende, at least at the moment.
We’ll talk about this and more today when I co-hos with our pal Hugh Hewitt on his syndicated radio show, airing from 6-9 am ET, live from the home studio deep in the heart of Texas! We will have a great lineup of guests and regular contributors:
- Sonny Bunch
- Admiral James Stavridis (USN, ret)
- Senate candidate David McCormick (PA)
- Dr. Larry Arnn and the Hillsdale Hour
- Lots of Twitter talk too, and a celebration of the Steelers’ 1st round draft pick
We’ll also take your calls to the show at 800-520-1234, and you can watch the show live at The Hughniverse. There’s a great chat room that goes with it, and lots of original content in the troll-free websurfing experience for subscribers. The audio also streams at HughHewitt.com.