Kremlin spokesperson Peskov says no decision taken to covert Russian LNG sales to rubles

Russia announced on July 5 that no decision had been made on whether to convert Russian liquefied natural gas (LNG) sales to rubles. During a press conference, Kremlin spokesman Dmitry Peskov also stated that the details of Gazprom's proposals, including whether they concern only LNG from its portfolio or the export of all LNG, should be directed to the company itself.

In response to a question about a Gazprom representative's statement about the prospects for selling LNG for rubles and how much such an idea has been worked out at the Kremlin level, as well as whether a corresponding presidential decree is planned in the near future, Peskov told reporters, "So far, no decisions have been made on this matter. And there are no prepared decrees on this matter."

According to a senior manager quoted by the Interfax news agency on July 4, Russia's Gazprom may propose extending its "rubles for gas" programme for pipeline gas to include LNG. Further, on July 4, the Interfax report quoted Kirill Polous, deputy department head at Gazprom as saying that there is a foreign exchange war going on between LNG, which is taxed in dollars, and pipeline gas, which is sold in rubles and sold as a commodity.

New decree by Putin may force foreign investors out of the Sakhalin-2 gas project

On June 30, Russian President Vladimir Putin signed a decree transferring all rights and obligations of the Sakhalin-2 oil and gas project to a new Russian entity, effectively giving the Kremlin the power to centralise foreigners' stakes in one of the world's largest energy projects and escalating the ongoing gas wars. Putin's decree states that Gazprom will retain the majority stake, but foreign investors must apply to the Russian government for a stake in the newly formed company within one month or risk being evicted.

Any request will be approved or denied by the government. Putin's regulation will only further unsettle energy markets and put additional strain on the LNG market. This year, Europe has imported record amounts of LNG as it rushes to fill storage tanks ahead of the heating season. For the first time, Europe imported more LNG than piped gas from Russia this week, putting pressure on LNG producers, as the current production capacity is insufficient to meet demand from both Asia and Europe at the same time.

Putin's order can be interpreted as an effort to increase pressure on the West by simultaneously limiting gas supplies to Europe and increasing demand for LNG in Asia, which will reduce supplies currently going to Europe. After reducing gas flows to Europe by 60% in the middle of June, Gazprom has raised concerns about gas shortages that could trigger a significant energy crisis this fall. The second stage of the EU's three-stage energy crisis warning system has already been initiated in Germany.

(Image: AP)