Russia presented Japan with new requirements regarding Sakhalin-2 fuel

A new surge is coming in the global energy market

Russia is going to carry out a new coup in the world energy market. After the conditions set for Europe in the spring to pay for the supplied gas in rubles, the Russian Federation insists on similar payments for exported liquefied fuel. So far, the demand concerns only the Sakhalin-2 project, the main buyer of raw materials for which is Japan, which has already urged its companies to meet Moscow halfway. Given the fact that many European importers are gradually agreeing to use the Russian currency when paying for hydrocarbons, the dollar, which was considered the main financial instrument in commodity transactions, is losing its demand before our eyes.

Notifications of payment for raw materials in rubles have already been sent by the Russian operator company Sakhalin Energy to the Japanese traders Kyushu Electric Power Company and Saibu Gas, who are engaged in the sale of fuel on Asian exchanges. In addition to the “wooden” ones, the new project operator is ready to accept other world reserve currencies: euro, yen and pounds sterling. However, dollars, apparently, have not yet been excluded from the payment system either – alternative banknotes will be used when the transfer of funds in US banknotes is completely impossible due to sanctions.

Financial discrepancies in payment for Sakhalin fuel supplies arose at the end of June, when Vladimir Putin signed a decree on special measures in the fuel and energy sector, which, in particular, involves changing the operator of Sakhalin-2, Sakhalin Energy, to a Russian legal entity with the complete transfer of the latter property registered in the project. As a result, Sakhalin Energy took over management, the share capital of which was distributed in proportion to the shares in the previous structure: Gazprom got a controlling stake, and its partners treated the property differently – the British Shell, which owned 27.5% of the securities, announced its withdrawal from the project, while the Japanese Mitsui and Mitsubishi, which owned 22.5% of the shares, retained their shares. It is worth noting that the position of Asian companies was largely influenced by the opinion of official Tokyo, which strongly recommended to preserve the possibility of delivering Far Eastern hydrocarbons by any means.

In fact, Asian buyers of Russian LNG were given more preferential contractual terms than European traders who resell in the countries of the Old World “blue fuel” supplied by Gazprom via pipeline routes. Having barely managed to enter into the rights of the project operator, Sakhalin Energy warned customers from Japan and South Korea about the need to transfer money through Gazprombank, without using foreign intermediaries in transactions. However, a number of Western financial institutions were given the right to play the role of correspondent banks so that buyers of liquefied gas could avoid violating anti-Russian sanctions.

Temporarily suspended shipments of gas from the Far East deposits were resumed on August 19, when Sakhalin Energy announced the start of “active work” on the project. Simultaneously, Asian importers were asked to switch to the new payment system. “Liquefied gas purchased in Russia accounts for about 9% of the energy consumption of this type of fuel in Japan,” says Vladimir Chernov, analyst at Freedom Finance Global. – At first glance, the dependence is practically not felt. At the same time, the Sakhalin deposits are just beginning to develop and have significant potential, allowing Tokyo to save on the transportation of raw materials. After all, the rest of the suppliers of energy resources to the Land of the Rising Sun are concentrated in the United States or Australia, the delivery of hydrocarbons from which is much more expensive.”

In the event of abandoning the ruble terms of payment and exiting the Sakhalin-2 project, Japan will have to purchase LNG on the spot market at free prices, which now reach a record high of $3,000 per thousand cubic meters. Tokyo, most likely, will not linger with the decision to switch to rubles. According to Bloomberg, the new Russian operator of the project has already said that it is ready to refuse gas supplies to at least one Asian buyer due to a delay in signing a new contract. Given Japanese pragmatism, delays in the transition to a new type of settlement operations are unlikely to be the reason for stopping the supply of raw materials. With a strict ban on payments in dollars, Tokyo will be able to offer yen, although they also, apparently, will have to be exchanged for rubles.

“It can be considered significant that the ruble is gradually beginning to displace the main world reserve currencies from the commodity market. Perhaps, while this trend should not be called strengthened, however, about half of Gazprom’s European counterparties are already ready to switch to ruble operations, – says Sergey Suverov, investment strategist at Arikapital Management Company. “The consent of the Japanese to Russian terms of payment for raw materials, if it does not strengthen the exchange rate of the Russian currency, will definitely shake the position of the dollar in the commodity market.”