Asian gas buyers puzzle over Putin’s demand for payment in roubles

TOKYO: Asian importers of Russian gas were scrambling on Thursday after Russian President Vladimir Putin said “unfriendly” countries must pay for Russian gas in roubles, in the latest jolt to global energy markets after Moscow’s invasion of Ukraine.

Japan, South Korea and Taiwan were on the list of countries deemed unfriendly. They all import liquefied natural gas (LNG) from the Sakhalin-2 and Yamal LNG projects in eastern Russia.

Putin said on Wednesday that Russia, which calls its actions in Ukraine a “special military operation”, would continue to supply gas in volumes and prices fixed in contracts but would require payment in Russian roubles.

Japan, the biggest importer of Russian LNG in Asia, had no idea how Russia would enforce that requirement.

“Currently, we’re looking into the situation with relevant ministries as we don’t quite understand what (Russia’s) intention is and how they would do this,” Finance Minister Shunichi Suzuki said in parliament.

Japan imported 6.84 million tonnes of LNG from Russia in 2021, according to Refinitiv trade flow data, making up nearly 9% of its LNG imports.

JERA, Japan’s biggest LNG buyer, has not received any notification from Sakhalin Energy, the joint venture that operates Sakhalin-2, to change the currency of payment from the U.S. dollar, a company spokesperson said. The spokesperson added that the country’s biggest power generator will keep gathering information.

A thermal power and fuel joint venture between Tokyo Electric Power Company Holdings and Chubu Electric Power, JERA buys about 2 million tonnes a year of LNG from the Sakhalin-2 project under long-term contracts, according to Japan Oil, Gas and Metals National Corporation’s data.

Tokyo Gas and Osaka Gas, the country’s two biggest local gas suppliers, also were checking details on the rouble requirement, company spokespersons said on Thursday.

Tokyo Gas, one of Japan’s largest LNG buyers, declined to comment on any details of its long-term contract for 1.1 million tpy with Sakhalin Energy, including what currency it can use for payment.

Sakhalin Energy is 50% owned by Russia’s Gazprom, with Shell holding a 27.5% stake while the rest is held by Japan’s trading companies Mitsui & Co and Mitsubishi Corp. Shell said on Feb. 28 that it would quit the project and the Japanese government has said Shell’s exit did not impact Japan’s energy imports.

Mitsui and Mitsubishi are checking details of the Russia’s announcement, their spokesmen said.