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Putin Now Orders Europe To Pay In Russian Roubles For Gas Export

By Abraham George
April 1,2022

Vladimir Putin said today that if countries don’t pay in roubles, Europe’s gas will be cut off from tomorrow. Vladimir Putin, announcing a decree on TV, said that foreign buyers would have to open rouble accounts in Russian banks that could be used to pay for gas delivered from tomorrow. People who buy things from us will have to pay us back if they don’t. ‘Nobody gives us anything for free, and we’re not going to do any kind of charity,’ said the man.

A lot of people think this is a way to make the Russian dollar stronger, which fell to a record low when the West put sanctions on him after he sent his army into Ukraine on February 24. A lot of Western businesses and governments don’t like the idea because it’s against their contracts, which are set in euros or dollars. After Vladimir Putin started fighting in Ukraine, Russia’s economy and trade have been hit hard by a wide range of sanctions. However, EU governments haven’t taken action against Russia’s oil and gas contracts because many member states rely on the Kremlin for their energy.

The European Union gets 30% of its oil from Moscow and 40% of its gas from Russia, which costs the bloc £340 million (€400 million) a day. It’s not easy for Moscow to follow through on threats to stop delivering oil and gas to Europe because the Kremlin doesn’t have any other pipelines or storage facilities to store the oil and gas until new buyers can be found. During a meeting, Putin said that the change was meant to strengthen Russia’s independence. He said that if foreign buyers agreed to pay in roubles, Moscow would keep its end of the bargain.

Russian President Vladimir Putin today threatened to turn off Europe's gas supplies from tomorrow if foreign buyers refuse to pay in roubles

Russian President Vladimir Putin today threatened to turn off Europe’s gas supplies from tomorrow if foreign buyers refused to pay in roubles.

Robert Habeck, the German Economy Minister, said today that Putin’s demand for payment in roubles was a breach of contract and that the move was “blackmail.” Separately, German Chancellor Olaf Scholz said that German businesses would keep paying for Russian gas in euros as agreed to in their contracts. As long as companies want to pay in euros, that’s still the case. He said this at a joint news conference with his Austrian counterpart Karl Nehammer.

Companies don’t plan to pay for Russian gas in roubles, a spokesperson for British Prime Minister Boris Johnson said, adding that the government is paying attention to how President Putin’s demand could affect the European gas market and how it might affect prices. During a meeting last week, Putin said Russia would only accept roubles as payment from countries that were unfriendly in response to sanctions that were put in place because of his invasion of Ukraine. For natural gas sales in Europe and other places, Gazprom says that 58 percent of the money it made from those sales on January 27 was in euros. Sales in US dollars made up about 39% of gross sales, and sterling made up about 3% of gross sales.

Unless buyers agree to the new rules, their contracts will be canceled. They must open rouble bank accounts in Russian banks, and they must sign a Kremlin decree. Even though people can still buy gas with foreign money, they can still give the bank permission to sell that money for roubles, which are then put in a second account where gas is actually bought. Putin also said today that foreigners who buy Russian gas will have to use special accounts at Gazprombank to pay for it.

It was at its highest level against the dollar since March 2. People who export more get more money back, which helps the government pay for the war in Ukraine. Dollars, euros, and pounds are also less valuable to Russia because it doesn’t have as much access to international markets. This makes the currencies more difficult to use. Initially, Moscow planned on selling foreign currency investments for roubles in order to raise the price. The plan was scuppered when the Western world agreed to cut Russian banks out of the Swift global payment system in February.

As a result, the Kremlin told exporters that they had to change about 80% of the money they earned from outside the country into roubles. All of the energy and other goods that Russia sells could be sold for more money in roubles, making the Kremlin’s attempts to make the West feel the sanctions it put on them for the invasion of Ukraine even tougher.