'Refusal to pay in roubles' | Russia cuts off gas to defiant Orsted

CEO Mads Nipper says situation underpins need of EU to accelerate the build-out of renewables

Bernd Radowitz

Russian gas monopolist Gazprom has halted the supply of fossil gas to Orsted this morning after the Danish utility refused to pay for gas supplies in Russian roubles.

Gazprom Export had maintained its demand to be paid for gas in roubles, but Orsted said was is under no obligation to do so under its current contract, and would continue to pay in euros.

“At Orsted, we stand firm in our refusal to pay in roubles, and we’ve been preparing for this scenario, so we still expect to be able to supply gas to our customers,” Orsted chief executive Mads Nipper said.

“The situation underpins the need of the EU becoming independent of Russian gas by accelerating the build-out of renewable energy.”

Orsted is better known as global champion of offshore wind, but as Danish utility also had imported relatively small volumes of Russian fossil gas for Danish households. Nipper in late April had said Gazprom deliveries to his company only accounted for 1.5% of European gas imports from Russia.

Like energy groups across the continent, Orsted on 1 April had received a demand to pay in roubles for deliveries by Gazprom, which expected the Danish company to respond to the request by the end of May. Russian president Vladimir Putin had demanded payment in roubles in order to shore up his country’s currency, which has plunged in the wake of western economic sanctions.

But unlike some German and Italian companies, Orsted refused to take part in a face-saving scheme under which Russia had suggested that European countries would agree to a payment method under which they would open accounts at Gazprombank and make payments for Russian gas imports in euros or dollars. Those would subsequently be converted into roubles on a second account with the bank, and then transferred to Gazprom itself (which owns Gazprombank).

German utility Uniper, a unit of Finland’s Fortum and a major importer of Russian gas to Germany, had told Recharge earlier that it considers using that scheme, which some countries like the Netherlands regard to be a breach of the EU’s decision to refuse payments in roubles and thus undermining sanctions.

The situation for Orsted and Denmark is different from that of Uniper and Germany, though, due to the small amounts imported and the country’s geographic localisation.

As there is no gas pipeline going directly from Russia to Denmark, Russia is not able to directly cut off the gas supplies to Denmark, and it will thus still be possible for Denmark to get gas. However, this means that the gas for Denmark must, to a larger extent, be purchased on the European gas market, Orsted said.

Gazprom also had threatened to cut off gas supplies to Shell for its contract to supply gas to Germany, and has already stopped gas supplies to the Netherlands, Poland, Bulgaria and Finland.

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