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France and Germany have announced they will not comply with Russian president Vladimir Putin’s demand that European nations pay for Russia’s imported gas with rubles, Russia’s national currency.
“Unfriendly” countries “must open ruble accounts in Russian banks,” Putin said in a 31 March televised appearance. “It is from these accounts that payments will be made for gas delivered starting 1 April,” he said.
Countries deemed unfriendly include Australia, Canada, Japan, New Zealand, South Korea, the U.K., the U.S., and all European Union member nations, among several others.
The accounts must be opened with the Gazprombank, a subsidy of Gazprom, Russia’s largest oil company, according to Putin’s order. The countries would deposit euros or dollars into the account, then pay their gas bills in rubles converted from those currencies.
“If such payments are not made, we will consider this a breach of obligations on the part of our buyers, with all the ensuing consequences,” Putin added.
Russia already requires domestic companies being paid in foreign currencies to convert 80 percent of that revenue into rubles, a move designed to give Russia’s government and central bank a supply of currencies to spend outside the country.
France and Germany have said the demand is a breach of contract.
“We looked at the contracts,” German chancellor Olaf Scholz told a press briefing last week. “They say that payments are made in euros, sometimes dollars…I made clear in my conversation with the Russian president that that will remain the case.”
Both countries have said they are prepared for Russia to halt deliveries, which currently provide about 40 percent of Europe’s natural gas.
Europe has not embargoed Russian gas deliveries but has launched a plan to replace two-thirds of them with other energy sources by the end of this year and to use no Russian fuels by 2030.
Russia has hinted that it may demand payment in rubles for other exports as well and also has sharpened its punitive retaliation against Western allies by expanding the list of foreigners who are no longer permitted to visit Russia.
TRENDPOST: Strike one for Russia. Looking closer at the bottom line, and seeing losses ahead, today Kremlin spokesman Dmitry Peskov said Russia won’t immediately demand gas payments in rubles from “unfriendly states.” The switch from dollars will be an “absolutely thought-out, gradual and carefully calibrated activity. It is impossible to act otherwise.”
“Nobody is in a rush,” Peskov told reporters. “This is the move in stages, very cautious, with consideration of financial and economic realities existing on global markets. Certainly, there is no room for sudden changes.”