Putin: Gas payments must be in rubles
President Vladimir Putin said on Wednesday (Thursday in Manila) that Russia would only accept payments in rubles for gas deliveries to “unfriendly countries,” which include all European Union members, after Moscow was hit by unprecedented sanctions over its invasion of Ukraine.
Immediately after his announcement, the Russian currency — which has plummeted since the start of the conflict — strengthened against the dollar and euro, while gas prices rose.
“I have decided to implement a set of measures to transfer payment for our gas supplies to unfriendly countries into Russian rubles,” Putin said during a televised government meeting.
He added, however, that Russia would continue supplying the volume of gas outlined in its contracts.
Putin ordered Russia’s central bank to implement the new payment system within a week, saying it must be “transparent” and would involve the purchase of rubles on Russia’s domestic market.
Putin also hinted that other Russian exports may be affected.
Also on Wednesday, Russian space agency Roscosmos announced it, too, would insist its international partners pay it in rubles.
“We will also conclude all our external agreements in rubles,” Roscosmos head Dmitry Rogozin was quoted as saying by the official Tass news agency.
“It is clear that delivering our goods to the EU, the United States and receiving dollars, euros [and] other currencies no longer makes sense to us,” Putin said.
Ukraine was quick to denounce Russia’s “economic war” on the European Union and its efforts to “strengthen the ruble.”
“But the West could hit Russia with an oil embargo that would cause the Russian economy to plunge,” Ukrainian presidential advisor Andriy Yermak said on Telegram. “This is now a key economic battle and the West must collectively win it.”
Crippling sanctions
German Economy Minister Robert Habeck, whose country imported 55 percent of its natural gas from Russia before the conflict, said Putin’s demand was a breach of contract and that Berlin would discuss with European partners on “how we would react to that.”
Austrian energy company OMV said it would still keep paying for Russian gas in euros despite the announcement.
“We don’t have any other basis for the contract. I wouldn’t be able to do otherwise,” Alfred Stern, OMV chief executive officer, told Austrian television.
Western countries have piled crippling sanctions on Moscow since it sent troops into Ukraine.
The West froze some $300 billion of Russia’s foreign currency reserves abroad, a move that Foreign Minister Sergei Lavrov on Wednesday described as “theft.”
But while Washington banned the import of Russian oil and gas, the EU — which received around 40 percent of its gas supplies from Russia in 2021 — has retained deliveries from Moscow.
Brussels, however, has set a target of slashing Russian gas imports by two-thirds by the end of the year and is eyeing an oil embargo.
Russia has been moving to “dedollarize” its economy for years since the introduction of Western sanctions over its annexation of Crimea from Ukraine in 2014.
In March 2019, Russian state energy giant Gazprom announced its first sale of gas for rubles to an unnamed western European company.
Deputy Prime Minister Alexander Novak said on Wednesday a shift to trading in the national currency would “increase reliability.”
He warned that a full embargo on Russian oil and gas would lead to a “collapse” of the global energy markets and “unpredictable” spikes in prices.