Tommy Wilkes, John O’Donnell

LONDON/FRANKFURT – According to European officials and analysts, Putin’s promise to cut off customers from Russia’s gas if they pay in roubles instead of a threat to cease supplying it energy is more of a bluff to wardoff further sanctions than a serious threat.

Gaz was flowing normally to Europe on Friday. Some experts believe that the new arrangements may work in the same way as before, although the Russian currency will get a little more attention.

This is a summary of the reasons why Putin’s gaz ultimatum, at this point, is considered mere bluster.

What HAPPENED?

Russia accounts for 40% of Europe’s energy requirements. Moscow could shut down the gas lines, causing immediate energy shortages, closures of factories and crippling energy prices.

While gas contracts are usually priced in dollars and euros, Putin suggested that they be paid only in roubles.

Western nations called Putin’s demands “blackmail” but he refused to comply. It seems that they will not have to alter much. However, they could change the way they pay for gas so they can put more money into Russia’s pockets.

Putin signed a decree requiring foreign buyers to open Gazprombank accounts and make payments directly. This is in contrast to a German buyer who would have used a local bank for the transfer.

Gazprombank will then use the money to purchase roubles and prop up the currency.

Many European experts and officials were baffled by Putin’s demand for roubles. Much remains undetermined, which makes a final evaluation difficult.

Because gas bills are usually paid several weeks after delivery, there will be some time before we can determine if the new arrangement works. This means that any gas bill dispute or cut will take some time before it is resolved.

On Friday, there was no indication of any interruptions. Flows remained constant through the two major pipelines that transport Russian gas into Europe – Nord Stream 1 to the Baltic Sea and Nord Stream 1 into Slovakia.

The flow of gas through the Yamal Europe pipeline, which crosses Belarus, has reversed its direction. It now brings gas from Germany into Poland. However, this isn’t unusual.

Is IT A “STORM IN A TEACHUP?”

It seems to be so for now. Experts and officials from Europe believe that it’s primarily aimed at protecting Gazprombank (MCX) from any future sanctions. Europe would not be able to sanction Gazprombank without cutting its gas supply if Gazprombank does so.

According to an Italian minister, a Russian decree to pay for gasoline in roubles would remain unchanged if that happens.

Jeffrey Schott, of the Peterson Institute of International Economics (a think tank), stated that it was a “warning from Putin” not to increase financial sanctions.

The rouble wouldn’t get much boost either. The Russian central bank needed most foreign currency from the gas industry to convert into roubles prior to the invasion. It would now be necessary to convert all the foreign currency from gas into Russian currency.

It has become a storm in the teacup of what once sounded extravagant. It makes it the primary recipient of gas money, which provides an additional shield from sanctions surrounding Gazprombank,” Jack Sharples of Oxford Institute for Energy Studies said.

According to one European official, Putin wanted the switch to rouble payments to prove who was willing to accept it. But noone did.

The official stated that “after the pushback,” he was trying to find a system in which he could claim he won while actually something similar to the status-quo is still being maintained.”

WILL THE LIGHTS GO AWAY?

Russia’s strongest weapon against the “economic war” is its energy exports. European analysts and officials hesitate to deny that his threat to shut off supplies is real.

According to Dmitry Polevoy (an analyst with Moscow-based Locko-Invest), doing so would be a bad thing for Russia’s Gazprom as it would have difficulty offloading all European-bound gaz to other buyers.

It is still believed to be symbolically important by experts. This has shaken Germany’s faith in Russia’s reliability, who this week took the extraordinary step of warning about possible rationing.

A European Union official stated that, while he considers the threat of a cutoff without payment for roubles to have been a “bluff”, the true implications of Putin’s demands are unclear. He suggested that the EU could take a more aggressive stance in the days ahead.