Mikhail Klimentiev | Afp | Getty Images Russian President Vladimir Putin has tried to increase pressure on foreign gas buyers by telling so-called “unfriendly” countries to pay in rubles from Friday – otherwise their supplies will be cut off. Surprisingly, however, the leaders of Germany and Italy appear uninvolved in Putin’s rhetoric. This is because they believe that European customers will not be bound by the new Kremlin mechanism and can continue to pay for Russian gas in euros or dollars. Putin issued a decree on Thursday insisting that foreign buyers of Russian gas must pay in rubles from Friday by opening a Russian bank account or canceling their delivery contracts. The Russian president has repeatedly called on so-called “unfriendly” countries to change currency for Russian gas, targeting those behind heavy economic sanctions aimed at isolating Russia for its unprovoked attack on Ukraine. “Today I signed a decree setting out the rules for trading Russian gas with so-called ‘unfriendly’ states. We offer counterparties from such countries a clear and transparent plan, in order to buy Russian gas, they must open ruble accounts “Russian banks,” Putin said in a televised address. “If these payments are not made, we will consider that the buyer has not fulfilled his obligations with all the consequent consequences.” Putin said existing contracts would be terminated if those conditions were not met by Friday. Germany, Europe’s largest consumer of Russian gas, said Putin’s decree was tantamount to “political blackmail”, while the United States said the measure showed economic “despair” on the part of the Kremlin. Instead of causing panic in Berlin and Rome, German Chancellor Olaf Soltz and Italian Prime Minister Mario Draghi believe the decree does not apply to them.
“A reflection process in Russia”
A German government reading a conversation between Scholz and Putin on Wednesday said the Russian president had informed Scholz that gas deliveries should be settled in rubles from April 1. “At the same time, [Putin] “In the conversation, he stressed that nothing will change for the European contract partners,” the statement said. Payments will continue to be made exclusively in euros as usual at Russia’s Gazprombank, which is not affected by the financial sanctions, and the bank will convert the money into euros. The Kremlin reading in the same call said the currency change was necessary due to the fact that the Bank of Russia’s foreign exchange reserves had been frozen by EU member states. It was agreed that experts from Russia and Germany would continue to negotiate on this issue, the Russian statement said. Italian Prime Minister Mario Draghi spoke to reporters on Thursday about his call with Russian Putin. Baris Seckin | Anadolu Agency | Getty Images Meanwhile, Italian Draghi also had a call with Putin on Wednesday. And speaking to reporters on Thursday about the outcome of those talks, Draghi said Italy did not expect a halt to Russian gas supplies. Existing contracts will remain in force and European companies will continue to pay in euros or dollars instead of rubles, Draghi said, according to Reuters. The Italian prime minister also said he believed Putin had eased previous demands for gas payments in rubles. “I think there has been a process of reflection in Russia that has led to a better definition of what it means to pay in rubles, as President Putin put it yesterday,” Draghi told Reuters on Thursday. “What I understood, but I may be wrong, is that the conversion of the payment … is an internal matter of the Russian Federation,” he added. Kremlin spokesman Dmitry Peshkov confirmed earlier in the week that Russia would not immediately seek gas payments in rubles, saying the change was likely to be a “gradual process”.
Europe’s dependence on Russian gas
Germany, along with the G-7, has signaled that gas supply agreements could not be changed unilaterally, and European buyers of Russian gas say the Kremlin has no right to re-enter into long-term contracts. Energy analysts say it is unlikely that Russian state-owned gas giant Gazprom will violate its existing contracts by refusing to supply gas to customers who refuse to pay in rubles in the short term. Russian state energy giant Gazprom said on Friday it was continuing to supply Europe with natural gas, Reuters reported. Andrei Rudakov Bloomberg | Getty Images Europe’s dependence on Russian energy exports has come to the fore since the Kremlin launched its invasion of Ukraine on February 24, especially as energy importers continue to fill Putin’s daily coffers with oil and natural gas revenues. gas. Analysis by the Transport and Environment campaign team shows that Russia’s military power is boosted by $ 285 million in oil payments made daily by European countries. Indeed, revenues from Russian oil and gas were blamed for about 43% of the Kremlin’s federal budget between 2011 and 2020, highlighting how fossil fuels play a central role for the Russian government. The European Union receives about 40% of its natural gas through Russian pipelines, many of which pass through Ukraine.
