Russia is trying to test the West’s resolve to impose economic sanctions with a ruble gambit

Russia will demand payments in rubles for gas sales from “unfriendly” countries, President Vladimir Putin said on Wednesday, sending European gas prices soaring amid concerns the move would exacerbate the region’s energy crisis.

Of course, Russia will continue to supply natural gas according to the volumes and prices stipulated in previously concluded contracts,” Putin said at a televised meeting with senior government ministers.

“The changes concern only the payment currency, which will be changed to Russian rubles,” he said.

Russian gas accounts for around 40 percent of Europe’s total consumption, and EU gas imports from Russia have fluctuated between €200 and €800 million per day so far this year.

The possibility that a currency change could upset this trade caused some European and UK wholesale gas prices to rise by around 15-20 per cent.

The Russian ruble briefly jumped to a three-week high above 95 against the dollar before settling near 100 following the shock announcement.

Mr Putin said the government and central bank had a week to find a solution on how to convert these operations into Russian currency and that gas giant Gazprom would be instructed to make the appropriate changes to gas contracts.

With big banks reluctant to trade in Russian assets, some major Russian gas buyers in the European Union were not immediately able to sort out how they might pay for gas in the future.

According to Gazprom, as of January 27, 58 percent of its natural gas sales to Europe and other countries were settled in euros. US dollars accounted for approximately 39 percent of gross sales and sterling for approximately 3 percent.

The European Commission has announced that it will reduce the EU’s dependence on Russian gas by two-thirds this year and end its dependence on Russian fuel supplies “well before 2030”.

The Commission, the executive branch of the 27 EU countries, did not immediately respond to a request for comment.

It is questionable whether Russia’s decision constitutes a violation of treaty rules.

Russia has created a list of “unfriendly” countries to match those that have imposed sanctions. Russia is trying to test the West’s resolve to impose economic sanctions with a ruble gambit

Fry Electronics Team

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