Europe's fragile energy market braces for Putin's next move

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LONDON - Europe may be hurtling towards a sudden halt of Russian gas, a scenario that would trigger energy rationing, higher inflation and a deep recession.

has already led Moscow to turn off taps to Poland and Bulgaria. With supply already tight, it won't take much more to send energy markets into shock.

President Vladimir Putin has decreed that gas customers in Europe pay in roubles, which the EU says violates sanctions and has called for companies to continue paying in euros - leaving it up to the Kremlin to refuse or accept. While the bloc aims to cut its dependency on Russian gas by two thirds this year, an abrupt halt would come too soon.

If Russia refused to send the fuel - critical for chemicals processes and powering auto factories - European governments would quickly implement rationing mechanisms. A complete halt in supplies across the region would lead to a 10 per cent reduction of industrial demand, according to energy consultancy Wood Mackenzie.

"Russia is showing that it's ready to get serious," German Economy Minister Robert Habeck said in Berlin last week, acknowledging that the country won't be in position to offset Russian gas for more than a year."That's not realistic, but we have to nonetheless attempt the unrealistic." Uniper, Germany's largest importer of Russian gas, is pursuing a workaround that would see it opening a euro account in Russia and allowing the funds to be converted by Gazprombank - one of the few Russian lenders that hasn't been sanctioned. It has to make a payment in late May. Berlin has signalled the plan is in compliance with EU guidelines, but it's unclear if it will satisfy Moscow.

 

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