2022 Russia–European Union Gas Dispute

The Russia–EU gas dispute flared up in March 2022 following the invasion of Ukraine in late February. Russia and the major EU countries clashed over the issue of payment for pipeline natural gas exported to Europe by Russia's Gazprom. In June, Russia cut the flow of gas by more than half, in July it stopped and resumed it, and in September it stopped it altogether. On 26 September 2022, the Nord Stream 1 and 2 gas pipelines both ruptured with evidence of sabotage.

Background

Europe consumed 512 billion cubic metres (bcm) of natural gas in 2020, of which 185 bcm (36%) came from Russia. In early 2022, Russia supplied 45% of EU's natural gas imports, earning $900 million a day, and by October 2022, it had decreased to 7.5%.

Following Russia's invasion of Ukraine in February 2022, the United States, the European Union, and other countries, introduced or significantly expanded sanctions to cut off "selected Russian banks" from SWIFT. Assets of the Central Bank of Russia held in Western nations were frozen: the Central Bank of Russia was blocked from accessing more than $400 billion in foreign-exchange reserves held abroad. Accounts in Western banks owned by Gazprom were also frozen. Any money deposited into these frozen Gazprom accounts including payments for natural gas were also frozen.

The Biden administration had initially allowed Russia to continue to repurpose its funds in U.S. financial institutions to make due payments on Russia's sovereign debt. But on 4 April 2022, the U.S. Department of the Treasury banned Russia from withdrawing funds held in U.S. banks to pay off its debt obligations.

Russia, which in early 2022 held $630 billion in foreign-exchange reserves, was consequently unable to make payments on its debt in US dollars or Euros as it was contractually required to do. Two dollar denominated bonds issued by Russian government matured on 4 April 2022. On 5 April, Russia attempted to pay its bond holders with dollars from $600M of reserves held in U.S. banks, but these were blocked by the U.S. government as part of the international sanctions during the Russo-Ukrainian War. In April 2022 Russia defaulted on its foreign debt by failing to pay its obligations in U.S. dollars. The credit agency S&P Global stated that Russia was in "selective default" because it tried to pay obligations on dollar denominated debt in rubles, which could not be converted into "dollars equivalent to the originally due amounts".

In March 2022, the European Commission and International Energy Agency presented joint plans to reduce reliance on Russian energy, reduce Russian gas imports by two thirds within a year, and completely by 2030. In April 2022, European Commission President Ursula von der Leyen said "the era of Russian fossil fuels in Europe will come to an end". On 18 May 2022, the European Union published plans to end its reliance on Russian oil, natural gas and coal by 2027.

Demand of payment in rubles, March 2022

On 23 March 2022, Russian President Vladimir Putin announced payments for Russian pipeline gas would be switched from "the currencies that had been compromised" (US dollar and euro) to payments in roubles vis-à-vis the previously formally designated " unfriendly countries", including all European Union states; on 28 March, he ordered the Central Bank of Russia, the government, and Gazprom to present proposals by 31 March for gas payments in rubles from "unfriendly countries". President Putin's move was construed to be aimed at forcing European companies to directly prop up the Russian currency as well as bringing Russia's Central Bank back into the global financial system after the sanctions had nearly cut it off from financial markets. ING bank's chief economist, Carsten Brzeski, told ''Deutsche Welle'' he thought the gas-for-ruble demand was "a smart move". At the end of April 2022, Russian Foreign Minister Sergey Lavrov said that the $300 billion of Gazprom's funds that had in effect been "stolen" by the "Western 'friends'" were actually the funds they had paid for Russia's gas, which meant that all those years they had been consuming the Russian gas free of charge; he thus made a point that the new payment system was designed to preclude "the continuation of the brazen thievery those countries were involved in".

On 28 March, Germany's Economy Minister Robert Habeck announced that the Group of Seven countries had rejected Russian President's demand that payment for gas be made in rubles. On the same day, Russian president's spokesman, Dmitry Peskov

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