Germany is preparing to ration its natural-gas supply if a standoff with Russia over ruble payments escalates further

• Germany has activated an emergency plan to cope with disruptions to its natural-gas supply.
• Europe's largest economy is heavily reliant on Russia for natural gas.

Germany — Europe's largest economy — has activated an emergency plan to deal with disruptions to its natural-gas supply after Russian President Vladimir Putin demanded payment in rubles.

Russian gas accounted for 55% of Germany's gas imports in 2021 and 40% of its gas imports in the first quarter of 2022, Reuters reported.

Germany is in the "early warning phase" of its emergency plan, with Berlin calling all consumers — from industry to households — to conserve energy and reduce consumption. If the situation worsens, the country may start rationing gas in the last of the three-stage plan, as outlined by Germany's economy ministry.

"There are no supply bottlenecks at present. Nevertheless, we need to step up our preventive measures in order to be ready to cope with any escalation by Russia," Robert Habeck, Germany's economy minister, said in a statement on Wednesday.

On Monday, the Group of Seven rejected Putin's demands for gas supplies to be paid in rubles, citing a breach in existing agreements. But on Thursday, Putin signed a decree requiring countries importing Russian gas to pay in rubles from April 1 and threatened to cancel existing contracts of those that didn't comply, Reuters reported.

Putin's decree came a day after he told German Chancellor Olaf Scholz that the country could pay for gas in euros, Reuters reported, citing a German government spokesperson.

The spokesperson added, "Scholz did not agree to this procedure in the conversation, but asked for written information to better understand the procedure," Reuters reported.

Imposing gas rations would hit the German economy badly.

Under the country's emergency plan, industry would be first in line for supply cuts. The move could devastate the economy and lead to job losses, business leaders and unions told the German media outlet DW.

A union leader from BASF — the world's largest chemical-maker — told DW that all 40,000 employees in the key production site in the western city Ludwigshafen would have to be put on shorter working hours or be laid off.

"The consequences would not only be reduced work hours and job losses, but also the rapid collapse of the industrial production chains in Europe — with worldwide consequences," said Michael Vassiliadis, the president of Germany's IG BCE chemical workers union and a BASF supervisory board member, DW reported.

Last week, Germany pledged to end the use of Russian gas in 2024, Reuters reported, citing Habeck.