By Tommy Wilkes and John O'Donnell
LONDON/FRANKFURT (Reuters) - Russian President Vladimir Putin's vow to cut customers off from its gas unless they start paying in roubles is more of a 'bluff' to ward off further sanctions than a genuine threat to stop supplying energy, according to European officials and analysts.
Gas was flowing to Europe normally on Friday, and some experts reckon the new arrangement may be broadly the same as the old process of paying, with only a slight boost for the embattled Russian currency.
Below is an outline of why, for now at least, Putin's gas ultimatum is considered bluster.
WHAT HAPPENED?
Europe is heavily reliant on Russia for its energy needs, with around 40% of its gas coming from the country. So if Moscow turned off the taps it could trigger immediate shortages, factory closures and crippling energy costs.
Gas contracts are priced in euros or dollars but Putin said they should be paid in roubles.
Western countries called Putin's demand "blackmail" and refused. Now it seems they won't have to change much, although they may switch how they pay for their gas in order to put money more directly into Russia's pocket.
Under the decree signed by Putin, foreign gas buyers must open accounts in state-controlled Gazprombank from Friday and pay direct - rather than, say, a German buyer using a local bank to transfer the money.
Gazprombank would then use that money to buy roubles, propping up the currency, a role typically done by the Russian central bank, which has been hobbled by the freezing of hundreds of billions of its reserves in response to war.
Putin's rouble demand baffled many European officials and experts and much remains unclear, making a final assessment difficult.
There will be a time lag before we know whether the new payment arrangement is workable because gas bills are paid weeks after delivery. That means any dispute - or gas cut -is some time off, if it happens at all.
There was no sign on Friday of immediate interruptions. Flows remained steady through two of the three main pipelines bringing Russian gas into Europe - Nord Stream 1 across the Baltic Sea, and into Slovakia over Ukraine.
Flows through the other main route, the Yamal-Europe pipeline over Belarus, had reversed direction, now bringing gas from Germany to Poland, but this is not uncommon.
IS IT A 'STORM IN A TEACUP?'
For now, it seems so. European officials and experts believe it is chiefly aimed at shielding Russian energy giant Gazprom (MCX:GAZP) from future sanctions - if Gazprombank collects the money, Europe could not sanction it without cutting gas.
An Italian minister said that if Russia's decree to pay for gas in roubles stays as it is "all in all, not a lot would change".
"It amounts to a warning from Putin not to tighten financial sanctions further," said Jeffrey Schott of the Peterson Institute of International Economics, a think tank.
It wouldn't be much of a boost for the rouble either. Prior to the invasion, the Russian central bank required most of the foreign currency from gas to be converted into roubles. Now all of it would have to be switched into the Russian currency.
"What sounded grandiose has turned into a storm in a teacup. By making it the main recipient of money for gas, it puts an extra shield against sanctions around Gazprombank," said Jack Sharples of the Oxford Institute for Energy Studies.
One European official said he believed Putin had demanded the switch to rouble payment to test who would go along with it. But noone did.
"After the pushback, he is trying to find a system where he could claim that he had won, while in fact something close to the status quo is continuing," the official said.
WILL THE LIGHTS GO OUT?
Energy exports are Putin's most powerful lever as Russia tries to fight back against what it calls an "economic war". European officials and analysts are reluctant to say his threats to switch off supplies are truly empty.
Doing so would hurt Russia's Gazprom, as it would struggle to offload all European-bound gas to alternative buyers, said Dmitry Polevoy, an analyst at the Moscow-based brokerage Locko-Invest.
Experts believe it is nonetheless symbolically important and it has rattled faith in Russia's reliability in Germany, which this week had to take the exceptional step of warning of potential rationing ahead.
One European Union official said that while he considered the threatened cutoff without payment in roubles to be a 'bluff' the full implications of Putin's demands were unclear and that a tougher stance could emerge in the coming days.