BERLIN/FRANKFURT--Germany triggered an emergency plan to manage gas supplies on Wednesday under which Europe's largest economy could ration power if a standoff over a Russian demand to pay for fuel with roubles disrupts or halts supplies.
Moscow's insistence on rouble payments for the Russian gas that meets a third of Europe's annual energy needs has galvanised others in Europe: Greece called an emergency meeting of suppliers, the Dutch government said it would urge consumers to use less gas and the French energy regulator told consumers not to panic.
The demand for roubles, which has been rejected by Group of Seven nations, is in retaliation for crippling Western sanctions on Russia following its invasion of Ukraine. Moscow, which says it is conducting a "special military operation" there, calls Western measures an "economic war."
Russia's most senior lawmaker said on Wednesday Russia could demand rouble payments also for other commodities including oil, grain, fertilisers, coal and metals, raising the risk of recession in Europe and the United States. Moscow is expected to make public its plans for rouble payments on Thursday, although it said it would not immediately demand that buyers pay for gas exports in the currency.
Russian President Vladimir Putin told German Chancellor Olaf Scholz by phone on Wednesday that nothing would change for European partners and payments would still be made in euros and transferred to Gazprom bank, a German spokesperson said. Separately, Putin outlined the rouble plan in a phone call with Italian Prime Minister Mario Draghi, Draghi's office said.
Two Russian sources told Reuters as one of the options for the switch, Russia planned to keep contract prices for gas exported to "unfriendly" countries but demand the payment to be done in the rouble equivalent on a pre-agreed settlement day. Western countries have said payment in roubles would breach contracts that can take months or more to renegotiate, a prospect that has driven commodity prices higher.
It would also blunt the impact of Western curbs on Moscow's access to its foreign exchange reserves and bolster its currency.
The European Union is preparing more sanctions against the Kremlin, EU sources told Reuters on Wednesday, with their scope depending on Moscow's stance on gas payments in roubles.
Berlin's unprecedented move is the clearest sign yet that the European Union is preparing for Moscow to cut gas supplies unless it gets payment in roubles. Italy and Latvia have already activated warnings.
German Economy Minister Robert Habeck implemented the "early warning phase" of an existing gas emergency plan, where a crisis team from the economics ministry, the regulator and the private sector will monitor imports and storage. Habeck told reporters Germany's gas supplies were guaranteed for now but urged consumers and companies to reduce consumption, saying that "every kilowatt hour counts".
If supplies fall short, Germany's network regulator can ration gas, with industry first in line for cuts and preferential treatment for private households, hospitals and other critical institutions.
Even without the threat of gas shortages, Germany could face recession as climbing energy costs have already forced companies, including makers of steel and chemicals, to curtail production. German industry association BDI on Wednesday asked for government support, including loans and state participations, to prevent firms from going bust, while government's economic advisers slashed this year's growth forecast because of the Ukraine crisis.
Half of Germany's 41.5 million households use natural gas for heating while industry account for roughly a third of national demand. Russia is Germany's top gas supplier, accounting for 40% of imports in the first quarter of 2022. Berlin has pledged to end its energy dependency on Moscow but it will not achieve that before mid-2024, according to Habeck.
