Europe’s Russian gas in jeopardy, Ukraine braces for new assaults

Russia’s President Vladimir Putin yesterday threatened to halt contracts supplying Europe with a third of its gas unless they are paid in roubles, his strongest economic riposte so far to crushing Western sanctions over his invasion of Ukraine.The continent’s biggest recipient of Russian gas, Germany, called the ultimatum for today “blackmail”. But Moscow did offer a mechanism for buyers to obtain roubles by sending foreign currency to a Russian bank.The energy showdown has huge ramifications.Europe wants to wean itself off Russian energy but that risks further inflating soaring fuel prices.Russia has a huge revenue source at stake even as it reels from sanctions.Putin’s five-week invasion of Ukraine has killed thousands, pulverised residential buildings, left masses of terrified people cowering and hungry in basements, and uprooted about a quarter of the 44mn population from their homes.Facing stiff resistance from Ukraine’s military and a militant Western stance, Putin has played one of his biggest cards in the demand on European energy buyers.“They must open rouble accounts in Russian banks. It is from these accounts that payments will be made for gas delivered starting from tomorrow,” he said yesterday, adding that Europe had until now been getting some gas for free because it was paying in euros and then freezing them.“If such payments are not made (in roubles), we will consider this a default on the part of buyers, with all the ensuing consequences... existing contracts will be stopped.” Western companies and governments say that would be a breach of contracts in euros or dollars, but they were anyway preparing for a potential full-blown energy crisis.However, the order signed by Putin does allow them to send foreign currency to a so-called “K” account at Russia’s Gazprombank, which would then return roubles for the buyer to make payment for the gas.“Potentially, the Kremlin is acting from a fear that Gazprombank will soon be sanctioned too, amid a wider bid by the European Union to cut energy ties with Russia completely,” said analysts at Fitch Solutions.“Russia would have to physically halt gas flows to EU 27 (European Union member states) to force the issue, marking a major escalation not even performed at the height of the Cold War. It would mark another major financial blow to Russia’s coffers.”Putin sent troops on February 24 for what he calls a “special military operation” to demilitarise and “denazify” Ukraine.But at talks this week, Moscow said it would scale back offensives near the capital Kyiv and the north as a goodwill gesture and focus on “liberating” the southeastern Donbas region.Kyiv and its allies say Moscow is simply trying to regroup following losses from a Ukrainian counter-offensive that has recaptured suburbs of Kyiv and strategic towns and villages in the northeast and southwest.Ukraine’s President Volodymyr Zelensky praised “our defenders” who had resisted aerial bombardments and pushed armoured columns back.Now, he said, Russia was building up forces for new strikes on the Donbas, which it demands Ukraine cede to pro-Moscow separatists. In the besieged Black Sea port of Mariupol, tens of thousands of people have been trapped for weeks without power and with scant food, water and other supplies.The International Committee of the Red Cross (ICRC) said it was bringing a convoy of aid to the city, which once housed 400,000 people and has been destroyed by relentless bombardment.