Putin ‘blackmail’ threat to suspend energy supplies to Europe branded hollow

Moscow says it will turn off oil and gas taps unless ‘unfriendly’ states pay in roubles

(AP)

Vladimir Putin’s threats to cut off energy supplies to Europe have been dismissed as hollow by Western officials, because of the damage the move would do to a Russian economy already reeling from sanctions.

Putin has warned he will turn the taps off unless “unfriendly” countries start paying for oil and gas in roubles from Friday, in a move intended to shore up the value of the Russian currency, which has plummeted since Moscow’s 24 February invasion of Ukraine.

But Western officials today expressed scepticism that Moscow could find alternative buyers for its main exports, which are essential to fund Putin’s hugely expensive military adventure.

EU nations which are heavily reliant on Russia for energy supplies have so far shown a united front in opposing payment in roubles.

But there is speculation that Italy may be considering breaking ranks after the office of prime minister Mario Draghi said Putin had outlined a practical system for making the change in a phone call on Wednesday.

Germany’s finance minister Robert Habeck today said Berlin would not be “blackmailed by Putin” and the French economy minister Bruno le Maire said simply that “contracts are contracts” in reference to the fact that deals signed with Russian exporters generally stipulate payment in euros or US dollars.

Chancellor Olaf Scholz was unequivocal that any payments would not be in roubles, tweeting: “The payment... takes place according to the existing contracts in euros and dollars. That’s the way it is, it will stay that way, and I made that clear yesterday in my conversation with President Putin.”

A Downing Street spokesperson said that the UK was “monitoring” the potential impact of Russian action on European markets, amid fears that it could force prices further upwards.

The corporate headquarters of Gazprom Germania, in Berlin (Getty Images)

But asked if Britain might comply with the demand for payment in roubles, he said: "That is not something we will be looking to do."

While the UK imports little Russian gas and has announced its intention to end oil purchases by the end of the year, the rest of the EU depends on Moscow for around 40 per cent of its energy supplies, which were excluded from sanctions in order to keep the lights and heating on in countries like Germany and Italy.

However, Western officials played down the likelihood of a sudden halt to the flow of gas if EU capitals hold firm against Putin’s demands.

“Hydrocarbons and revenue from western Europe are so important to the Russian state and the Russian economy,” said one.

“Yes, it’s very difficult for some European countries to stop buying Russian oil and gas in the short term. It’s also incredibly difficult for Russians to stop selling oil and gas to western Europe.

“Even if over a period they might be able to increase sales to to the east - to China, to India - it’s not going to replace the sales that they that they are currently making to western Europe.

“I’m very sceptical that these sorts of threats would be seen through. I think it would just be too damaging to the Russian state. And of course, what would happen is that it would shock all the customers into moving even faster in diversifying even more quickly away from Russian hydrocarbons.”

Russia’s central bank has done an “effective” job in stabilising the rouble after its initial plunge following the imposition of global sanctions, said one Western official.

But they added: “That doesn’t mean that there hasn’t been a huge shock on the Russian economy or which is growing and will continue to grow over time.”

Over the last month alone, inflation in Russia has hit around 7 per cent, with prices of some foodstuffs – such as sugar – soaring by as much as 40 per cent since the invasion, said the official.

Even without the potential loss of revenues from oil and gas exports, the Russian economy is forecast to shrink by as much as 10 per cent this year, with unemployment rising to severe levels.