Kremlin: Gazprom could seek to change contracts if West caps Russian gas prices

MOSCOW, June 28 (Reuters) – The Kremlin said on Tuesday that Russian gas giant Gazprom GAZP.MM could seek to change the terms of its delivery contracts if Western countries implemented a price cap on Russian gas.

G7 leaders have agreed to study possible price caps on Russian oil and gas to try to limit Moscow’s ability to fund its military campaign in Ukraine.

Western officials say they want to encourage sales of Russian oil at levels slightly above production costs to ensure Russia’s earnings are reduced while it maintains production, but the full details are yet to be announced. 

“It depends on the direction, depends on the decision taken by Gazprom. Probably, they may raise a question of changing the terms of existing contracts, changing the price,” Kremlin spokesperson Dmitry Peskov said when asked about the gas cap idea.

Peskov did not elaborate on whether the changes may mean aligning the contracts with the proposed caps, or fully revising the contractual terms.

Gazprom did not immediately reply to a Reuters request for a comment.

Asked how G7 proposals to cap price for Russian gas and oil may hit the state budget, Peskov said: “We don’t yet know what it is about… According to our constitution, Russia is a social state – delivering on all social obligations is our main priority.”

Despite earning more than before sending troops to Ukraine as energy prices spiked amid sanctions-linked curbs, Russia is planning a budget deficit of 2% of gross domestic product this year as it boosts social and business support to offset sanctions. 

Even with that projected budget deficit, Russia needs an oil price at $100 per barrel this year to balance its budget, according to Natalia Orlova, chief economist at Alfa Bank.

The finance ministry did not reply to a Reuters request for comment.

(Reporting by Reuters; Editing by Kevin Liffey and Jan Harvey)