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Putin says to Europe: Pay in rubles or we’ll cut off your gas

Russian President Vladimir Putin is urging foreign buyers to pay for Russian gas in rubles from Friday or cut their supplies, a move European capitals opposed and Berlin called “blackmail”.

Utin’s move, signed by decree on Thursday, leaves Europe facing the prospect of losing more than a third of its gas supply. Germany, which is most dependent on Russia, has already activated a contingency plan that could result in rationing in Europe’s largest economy.

Energy exports are Putin’s strongest leverage as he seeks to resist sweeping Western sanctions imposed on Russian banks, corporations, businessmen and Kremlin employees in response to Russia’s invasion of Russia Ukraine. Moscow calls its Ukraine action a “military special operation”.

Putin said buyers of Russian gas “must open ruble accounts in Russian banks. Payments for gas deliveries will be made from these accounts starting tomorrow, April 1st.

“If such payments are not made, we consider this a default on the part of the buyers, with all the ensuing consequences. No one is selling us anything for free, and we’re not going to do charity either — that means existing contracts will be stopped,” he said in a televised address.

It was not immediately clear whether in practice there might be a possibility for foreign firms to continue payments without rubles, which the European Union and the G7 group of countries have ruled out.

Under the mechanism decreed by Putin, foreign buyers would use special accounts with Gazprombank to pay for the gas. Gazprombank would buy rubles on behalf of the gas buyer and transfer rubles to another account, the order said.

A source told Reuters that payments for gas delivered in April began in the second half of April for some contracts and in May for others, suggesting taps may not be turned off immediately.

Putin’s decision to impose ruble payments has given a boost to Russia’s currency, which has fallen to historic lows following the February 24 invasion. The ruble has since made up much lost ground.

Western companies and governments have rejected any attempt to convert their gas supply contracts to another payment currency. Most European buyers use euros. Executives say it would take months or longer to renegotiate the terms.

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Paying in rubles would also mitigate the impact of Western restrictions on Moscow’s access to its foreign exchange reserves.

Meanwhile, European nations are scrambling to find alternative supplies, but with the global market already tight, they have few options. The United States has offered more of its liquefied natural gas (LNG), but not enough to replace Russia.

“It is important to us not to give any signal that we are being blackmailed by Putin,” said German Economics Minister Robert Habeck, adding that Russia had not been able to divide Europe.

Federal Finance Minister Christian Lindner said existing gas contracts were based in euros and payments would continue to be made in that currency.

French Economy Minister Bruno Le Maire said France and Germany are preparing for the possibility that Russian gas supplies could be halted. He declined to comment on technical details related to recent Russian demands for ruble payment.

Putin said switching to rubles would strengthen Russia’s sovereignty. He said the West is using the financial system as a weapon and it makes no sense for Russia to trade dollars and euros if assets in those currencies are frozen.

“What is actually happening, what has already happened? We have provided European consumers with our resources, in this case gas. They received it, paid us in euros which they then froze themselves. In this regard, there is every reason to believe that we have delivered part of the supplied gas to Europe practically free of charge,” he said.

“Of course, this cannot go on like this,” Putin said, although he said Russia still values ​​its business reputation and will continue to honor obligations in its gas and other contracts.

European gas prices have skyrocketed in recent months as tensions with Russia increase, raising the risk of a recession. Soaring energy prices have forced companies, including steel and chemical manufacturers, to cut production.

British and Dutch gas prices rose 4 to 5 percent after Putin’s announcement.

“Those affected have not heard anything from Gazprom. But we should stand united and not allow ourselves to be divided between politics and business in Europe,” said Timm Kehler, Managing Director of the German gas industry lobby Zukunft Gas.

European companies have said little or nothing about the Russian announcement or their contracts with Gazprom, which has a monopoly on Russian pipeline gas exports.

Poland’s PGNiG said it is staying in touch with Gazprom, with whom it has a long-term contract that expires at the end of this year, but said it would not discuss details. Poland’s contract with Gazprom is for 10.2 billion cubic meters of gas per year and is denominated in dollars.

https://www.independent.ie/world-news/europe/putin-tells-europe-pay-in-roubles-or-well-cut-off-your-gas-41507716.html Putin says to Europe: Pay in rubles or we’ll cut off your gas

Fry Electronics Team

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