Russian President Vladimir Putin has threatened to cut gas supplies to Europe from April 1 unless his state is paid in rubles for their energy.
The hawkish leader revealed on Thursday that he had signed an executive order requiring foreign customers to pay for their gas in Russian currency from April 1 – reports The Mirror. In a TV appearance addressing the world, he also claimed that contracts would be terminated if demands were not met.
Putin said: “To buy Russian natural gas, they need to open ruble accounts in Russian banks. It is from these accounts that payments will be made for gas delivered from tomorrow. [Friday]. If these payments are not made, we will consider that it is a default of payment on the part of the buyers, with all the consequences that flow from it.
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“No one is selling us anything for free, nor are we going to do charity – that is, existing contracts will be stopped.”
Putin’s decision to impose ruble payments for gas boosted the Russian currency, which fell to historic lows as the West applied sweeping sanctions after sending its army to Ukraine on Feb. 24. But Western companies and governments dismissed the move as a violation of existing rules. contracts, which are denominated in euros or dollars.
(Image: YURI KOCHETKOV/EPA-EFE/REX/Shutterstock)
Putin said the change was aimed at strengthening Russia’s sovereignty and that he would meet his obligations on all contracts.
Russia provides around a third of Europe’s gas, so energy is the most powerful lever at Putin’s disposal as he tries to retaliate against harsh Western sanctions following his invasion of Ukraine. France’s economy minister said France and Germany were preparing for a possible scenario of Russian gas flows shutting down, which would plunge Europe into a full-fledged energy crisis.
Germany depends on Russia for 40% of its gas supplies. The country has warned that a stalemate is possible, which could lead to rationing. An order signed by Putin established a mechanism for buyers to transfer foreign currency to a special account in a Russian bank, which would then send rubles back to the foreign buyer to make payment for the gas.
He said the change was aimed at strengthening Russia’s sovereignty and that it would meet its obligations on all contracts.
(Image: Getty Images)
The value of the ruble fell from around 85 per euro last year to 110 after the start of the Ukrainian invasion. Only an intervention of the Russian central bank allows it to settle at 94.1 for one euro.
At such low levels, Russian exports bring in less money to subsidize state services and fund war. Requiring payments to be made in rubles will increase its value and bring in more money.