Kremlin demands rubles for gas, EU leaders push back
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Loading... - Amelia McPherson
- 01 Apr 2022
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Russian President Vladimir Putin insisted Thursday that the country’s natural gas must be paid for with rubles, a demand apparently intended to help bolster the Russian currency but one that European leaders say they will not comply with because it violates the terms of contracts and sanctions.
Putin said Russia will start accepting ruble payments Friday and gas supplies will be cut off if buyers don’t agree to the new conditions, including opening ruble accounts in Russian banks, from which the gas payments will be made.
“If these payments are not made, we will consider it a failure of the buyer to fulfill its obligations, with all the ensuing consequences,” Putin said.
European leaders cautiously insisted they will continue to pay for natural gas in euros and dollars and want to see the fine print of how the Kremlin will implement its decree. It came a day after the leaders of Italy and Germany said they received assurances from Putin about gas supplies.
Putin announced last week the countries deemed “unfriendly” for imposing sanctions on Russia over its war in Ukraine must pay for natural gas only in Russian currency. His proposal has caused natural gas prices to gyrate and raised fears it could be a prelude to an interruption of supplies to Europe, which is heavily dependent on Russian natural gas and would struggle with a sudden cutoff. At the same time, Russia depends on oil and gas sales for much of its government revenue at a time its economy is under severe stress from Western sanctions.
Putin’s demand appeared to be part of Russia’s efforts to boost the ruble after the currency plunged under Western sanctions. After dropping as low as 143 rubles to the dollar in early March, on Thursday it took 82 rubles to buy a dollar, around the same level as the day Russia launched its invasion.
Economists say switching the gas payments to rubles would do little to support the Russian currency, since gas exporter Gazprom has to sell 80% of its foreign currency earnings for rubles anyway. The White House said Thursday that the ruble is no longer a reliable measure of Russia’s economy because it’s being artificially propped up. Read More…
