Putin’s move, through a decree signed Thursday, leaves Europe with the prospect of losing more than a third of its gas supply. Germany, which is more dependent on Russia, has already launched an emergency plan that could lead to a coup in Europe’s largest economy. Energy exports are Putin’s most powerful lever as he seeks to retaliate against sweeping Western sanctions on Russian banks, companies, businessmen and Kremlin associates in response to the Russian invasion of Ukraine. Moscow calls its action in Ukraine a “special military operation.” Sign up now for FREE unlimited access to Reuters.com Register Putin said Russian gas buyers “should open ruble accounts in Russian banks. These accounts will be used to pay for gas delivered from tomorrow” or on April 1. “If such payments are not made, we will consider it a weakness on the part of the buyers, with all the ensuing consequences. No one is selling us anything for free and we are not going to do any charity – that is, the existing contracts will be terminated,” he told television. comments. It was not immediately clear whether in practice there could be a way for foreign companies to continue paying without using rubles, something the European Union and the G7 have ruled out. Under the mechanism ordered by Putin, foreign buyers would use special accounts at Gazprombank to pay for gas. Gazprombank would buy rubles on behalf of the gas buyer and transfer rubles to another account, the order said. read more A source told Reuters that payments for natural gas delivered in April to some contracts began in the second half of April and in May for others, suggesting the taps may not close immediately. read more Putin’s decision to impose ruble payments has strengthened the Russian currency, which has fallen to historic lows since the February 24 invasion. Since then, the ruble has regained much lost ground. LOOKING FOR ALTERNATIVES Western companies and governments have rejected any move to change gas supply contracts to another payment currency. Most European buyers use euros. Executives say it will take months or more for the terms to be renegotiated. The ruble payment will also mitigate the impact of Western restrictions on Moscow’s access to its foreign exchange reserves. Meanwhile, European countries are struggling to secure alternative supplies, but with the global market already tight, they have few options. The United States has offered more liquefied natural gas (LNG), but not enough to replace Russia. “It is important for us not to signal that we will be blackmailed by Putin,” said German Economy Minister Robert Habeck, adding that Russia had not been able to divide Europe. Russian President Vladimir Putin chairs a meeting on air transport development and aircraft construction via video link at Novo-Ogaryovo State Residence outside Moscow, Russia, March 31, 2022. Sputnik / Mikhail Klimentyev / Kremlin via REUTERS read more German Finance Minister Christian Lindner said existing gas contracts were based on euros and payments would continue to be made in that currency. French Economy Minister Bruno Lemerre said France and Germany were preparing for the possibility of a halt to Russian gas flows. He declined to comment on technical details related to the latest Russian ruble payment requirements. Putin said the change to the ruble would strengthen Russia’s sovereignty. He said the West was using the financial system as a weapon and that it did not make sense for Russia to trade in dollars and euros when assets were frozen in those currencies. “What is really happening, what has already happened? We have supplied European consumers with our resources, in this case with natural gas. They received them, they paid us in euros, which then froze themselves. In this respect, there is every “We have reason to believe that we have delivered part of the gas supplied to Europe practically free of charge,” he said. “This, of course, can not continue,” Putin said, although he said Russia still valued its business reputation and would continue to meet its gas and other obligations. TO STAY UNITED European gas prices have soared in recent months due to growing tensions with Russia that increase the risk of recession. Rising energy prices have forced companies, including steel and chemical manufacturers, to cut production. read more Gas prices in Britain and the Netherlands rose by 4% to 5% after Putin’s announcement. “Stakeholders have not yet heard from Gazprom. However, we must be united and not allow ourselves to be torn between politics and business in Europe,” said Timm Kehler, chief executive of German lobby Zukunft. Gas. European companies have had little or no comment on the Russian announcement or their contracts with Gazprom (GAZP.MM), which has a monopoly on Russian gas exports through pipelines. Polish PGNiG (PGN.WA) said it had been in contact with Gazprom, with which it has a long-term contract expiring at the end of this year, but said it would not discuss details. The Polish contract with Gazprom covers 10.2 billion cubic meters (bcm) of gas per year and is expressed in dollars. The Polish Ministry of Climate Change did not comment immediately. The Italian energy company Eni (ENI.MI), another major European buyer of Russian gas, also did not comment. It bought about 22.5 bcm of Russian gas in 2020. Its contracts with Gazprom expire in 2035. The Danish energy company Orsted (ORSTED.CO), which has a long-term contract with Gazprom, said it was waiting to hear from the Russian company and declined to comment further. UnB (UN01.DE) and EnBW (VNG.UL) of EnBW (EBKG.DE), two major German buyers of Russian gas, declined to comment, while RWE (RWEG.DE) did not respond immediately. Sign up now for FREE unlimited access to Reuters.com Register Reports from Reuters correspondents including Stephen Jewkes in Milan, Vera Eckert, Joseph Nasr and Tassilo Hummel in Berlin, Nina Chestney in London, Marek Strzelecki in Warsaw and Christoph Steitz in Frankfurt. Writing by Mark; Edited by Edmund Blair Our role models: The Thomson Reuters Trust Principles.
