Putin said Russia would start accepting ruble payments on Friday and gas supplies would be cut off if buyers did not agree to the new terms, including opening ruble accounts in Russian banks, from which payments would be made. natural gas. “If these payments are not made, we will consider that the buyer has not fulfilled his obligations, with all the consequent consequences,” Putin said. European leaders have cautiously insisted that they continue to pay for gas in euros and dollars and want to see the fine print on how the Kremlin will implement its decree. The day came after the leaders of Italy and Germany said they had received assurances from Putin about gas supplies. In Washington, US State Department spokesman Ned Price said Putin’s demand that buyers pay in rubles was a sign of Russian pressure amid sanctions. “I think this is really just another sign of the dire state of the Russian economy,” Price told reporters at a regular news conference.
Efforts to strengthen the ruble
Putin announced last week that countries considered “unfriendly” to impose sanctions on Russia over the war in Ukraine should pay for gas only in Russian currency.
Gas flames from a kitchen are reflected in a private residence in Bad Honnef, near Bonn, Germany, on Wednesday. Europe is heavily dependent on gas supplied by Russia and will face a sudden shutdown. (Wolfgang Rattay / Reuters)
His proposal sparked gas prices and raised fears that it could be a prelude to a major cut in Russian gas supplies to Europe.
At the same time, Russia is dependent on oil and gas sales for much of its state revenue at a time when its economy is under severe pressure from Western sanctions.
Putin’s demand appeared to be part of Russia’s efforts to strengthen the ruble after the currency fell under Western sanctions. After falling to 143 rubles against the US dollar in early March, it took 82 rubles to buy a dollar on Thursday, about the same level as Russia began its invasion.
Economists question the benefit of ruble payments
Economists say the change in ruble gas payments will have little support for the Russian currency, as gas exporter Gazprom will have to sell 80 percent of its foreign exchange earnings in rubles anyway.
The White House said Thursday that the ruble is no longer a credible measure of the Russian economy because it is artificially supported.
A street vendor sells fruit on a Moscow street on Thursday. (Natalia Kolesniikova / AFP / Getty Images)
Evercore ISI analysts say Putin’s main motivation seems to be “to prove that he can bend EU leaders at will.” They also said that even if Russia were able to force the EU to pay for gas in rubles, European countries could retaliate by imposing more tariffs on Russian oil imports or banning them altogether.
While Russia could eventually sell oil, the price would most likely fall sharply, analysts said.
The decree, signed by Putin and the state-run RIA Novosti news agency, states that a designated bank will open two accounts for each buyer, one in foreign currency and one in rubles. Buyers will pay in foreign currency and authorize the bank to sell it for rubles at the Moscow exchange. The rubles will then be deposited in the second account, where the gas is officially purchased.
“People are wondering what Putin is doing,” said Tim Ash, a senior emerging market analyst at BlueBay Asset Management.
Putin may have read the German government’s reluctance to boycott Russian energy as a weakness and is now trying to plan this energy crisis … the solution here is to call on Putin’s bluff and say, of course, cut off supplies energy and see who breaks first, “said Ash.
