Russian President Vladimir Putin demands foreign buyers pay Russian gas in a ruble from Friday or has their supply cut, the capital movement that is rejected and where Germany said it was as big as “extortion”.
Putin’s decision on Thursday made Europe face the prospect of losing more than a third of the gas supply. Germany, the most dependent on Russia, has activated an emergency plan that can cause allotment in the European largest economy.
Energy exports are the strongest Pupin lever when he tried to again against Western sanctions forced on Russian banks, companies, employers and Kremlin colleagues in response to Russian invasion to Ukraine. Moscow called his Ukrainian action as a “special military operation”.
Putin said the Russian gas buyer “must open a ruble account at Russian banks. From this account that payment will be made for gases sent from tomorrow,” or April 1.
“If such payments are not done, we will consider this default in the buyer’s section, with all the next consequences. No one sells anything for free, and we will not do charity too – that is, the existing contract will occur,” he said In comments broadcast on television.
Not immediately clear whether in practice there may be a way for foreign companies to continue payment without using a ruble, which is returned by the European Union and the G7.
Italy said it was related to European partners to provide strong responses to Russia, adding its own gas reserves would allow economic activities to continue even if there was a disturbance.
Meanwhile, the German energy company said they were in the conversation close to Berlin about how to respond to the possibility of supply disorders and arranging a road map about what to do if Russia stopped gas exports.
Looking for alternatives
Under the decreed mechanism by Putin, foreign buyers will use a special account in Gazprombank to pay gas. Gazprombank will buy a ruble on behalf of the gas buyer and transfer the ruble to another account, the Order said.
A source told Reuters that gas payments sent in April on several contracts began in the second half of April and May for others, showing a knock may not be turned off immediately.
Putin’s decision to uphold the payment of Rubel has increased the Russian currency, which fell to a historic position after the February 24 invasion. Rubel has since recovered a lot of lost soil.
“What sounds magnificent in a storm in a cup of tea. By making it the main recipient of money for gas, it puts an extra shield against sanctions around Gazprombank,” said Jack samples from Oxford Energy Studies.
The company and Western government have rejected any steps to change their gas supply contracts to other payment currencies. Most European buyers use Euros. The executive said it would take months or longer to negotiate the requirements.
Payments in Rubles will also blunt the impact of Western sidewalks on Moscow access to their foreign exchange reserves.
Meanwhile, European countries have competed to secure alternative equipment, but with the global market it has been strict, they have several choices. The United States has offered more liquid natural gas (LNG) but not enough to replace Russia.
“It is important for us not to signal that we will be squeezed by Putin,” said German Minister Robert Habeck, added that Russia could not divide Europe.
Payment will continue in the euro, Germany said.
French Economy Minister Bruno Le Maair said France and Germany were preparing the possibility of stopped Russian gas flow. He refused to comment on the technical details related to the latest Russian demands for ruble payments.
Putin said the switch to the ruble would strengthen Russian sovereignty. He said the West used a financial system as a weapon, and did not make sense for Russia to trade dollars and euros when assets in the currency were frozen.