Europe braces for gas cuts as Nato warns Russia regrouping in Ukraine

‘Historic release’ of 180 million barrels of oil from US stockpile in bid to cool crude prices

European countries are bracing for potential interruptions to gas supplies after Russian president Vladimir Putin warned the flow could be cut if payments were not made in roubles from Friday.

The step by Moscow, seen as a gambit to support its currency and counteract the effect of economic sanctions by the West, came as Nato warned that Russian troops were regrouping rather than withdrawing in Ukraine.

It comes as the US administration announced a “historic release” of about 180 million barrels of oil from the US emergency stockpile in a bid to cool crude prices, also saying it would punish some domestic oil companies that do not increase drilling.

President Joe Biden said the move was designed to lower "painful" petrol prices that were harming the finances of many households.

The new release of one million barrels a day is by far the biggest ever announced and will last for six months, draining almost a third of the US's Strategic Petroleum Reserve. The drawdown would take the reserve to its lowest level since 1984.

Idle wells

Mr Biden also accused oil companies of enjoying record profits while Americans paid high gasoline prices and said they should use the money to produce more oil or restart idle wells rather than pay investors.

“This is not the time to sit on record profits, it’s time to step up for the good of your country,” he said. “Right now, the oil and gas industry is sitting on more than 12 million acres of non-producing federal land with 9,000 unused but already-approved permits for production.”

Mr Biden said he was urging the US Congress to make companies “pay fees on wells from their leases that they have not used in years and on acres of public lands that they are hoarding without producing.”

In Europe, France and Germany have insisted that contracts to buy Russian gas are set out in euro and dollars and that companies can continue to pay in these currencies, rather than be forced to buy roubles for payment, which would prop up the currency's value.

Payment in roubles

But, on Thursday, Mr Putin announced he had signed a decree that overseas buyers would have to pay for Russian gas in roubles from Friday, and that if they did not “existing contracts will be stopped”.

It raises the prospect of interruptions to gas supplies in the EU, which relies on Russia for 40 per cent of its gas imports.

Highly dependent Austria and Germany took the first steps towards gas rationing this week, while the Netherlands warned citizens to mind their gas consumption in anticipation of potential shortages that economists have warned would cause economic damage.

A senior EU official said that while there was a lot of “detail missing” to understand what exactly the Russian government was demanding, but that if it involved paying euro to Russia’s Gazprombank to convert to roubles it may not be a substantial change.

“At a technical level, I’m not sure how different this is from what we have been doing all along,” the official said. – Additional reporting, The Financial Times Limited 2022

Naomi O’Leary

Naomi O'Leary

Naomi O’Leary is Europe Correspondent of The Irish Times

Martin Wall

Martin Wall

Martin Wall is Washington Correspondent of The Irish Times. He was previously industry correspondent