Gazprom (GZPFY), the Russian state energy giant, said on Tuesday that it would suspend exports of natural gas to Shell (SHLX) from Wednesday because the company had not made payments in rubles.
“Shell Energy Europe Limited has notified Gazprom Export LLC that it does not intend to make payments under the contract for the supply of gas to Germany in rubles,” Gazprom said in a statement on its Telegram account.
Gazprom said Shell would lose up to 1.2 billion cubic meters of annual gas supply, just a small fraction of the 95 billion cubic meters the country consumes each year, according to Germany’s economy ministry.
But Gazprom’s move is likely to take a toll on German industry, which is heavily dependent on Moscow’s gas. The country has already managed to reduce Russia’s share of its gas imports to 35% from 55% before the start of the war.
A German government spokesman told CNN Business he was “following the situation very closely”.
“Security of supply is guaranteed,” he said.
Gazprom’s announcement comes just days after it said it would shut off gas supplies to Danish energy company Ørsted and Dutch gas trading company GasTerra, and weeks after shutting off taps in Poland, Bulgaria and Finland.
In March, Russian President Vladimir Putin threatened to cut gas deliveries to “unfriendly” countries that refused to pay in rubles, instead of the euros or dollars indicated in the contracts.
Since then, Gazprom has been offering customers a solution. Buyers could make payments in euros or dollars to an account in Russia’s Gazprombank, which would then convert the funds into rubles and transfer them to a second account from which payment would be made in Russia.
But many European companies, including Shell Energy, have refused to comply.
“Shell has not accepted the new payment terms set by Gazprom,” a Shell spokesman told CNN Business on Tuesday. “We will work to continue to supply our customers in Europe through our diverse gas supply portfolio.”
GasTerra in the Netherlands said similarly in a statement on Monday that it would not comply with Gazprom’s “unilateral payment requirements”.
Henning Gloystein, director of Energy, Climate and Resources at Eurasia Group, told CNN Business that the latest shutdown did not represent a “significant loss of revenue” for Gazprom, as exports to Shell Germany accounted for less than 1% of total exports from Russia to Russia. the European Union last year.
“By contrast, European energy companies, which are much more dependent on Russian supply … have largely switched to Gazprom’s new payment mechanism to safeguard their operations,” he added.
– Inke Kappele, Anna Stewart and Robert North contributed to the report.