Russian President Vladimir Putin issued a decree on Thursday demanding payment for gas in rubles, but seemed to soften the mandate by allowing payments in dollars and euros through a designated bank, the latest change in Europe-based energy supply for heating. of houses and electricity generation. The move has been met with skepticism by European leaders, who insist the payment will remain in euros and dollars and want to see the fine print on how the decree will be implemented. Countries deemed “friendly” to Russia for imposing sanctions on Ukraine over the war could continue to pay in foreign currency through a Russian bank that would then convert the money into rubles, according to a Kremlin decree issued by the state media on Thursday. The day came after the leaders of Italy and Germany said they had received assurances from Putin about gas supplies. Putin spoke more harshly, saying Russia would start accepting ruble payments on Friday and that contracts would be suspended if buyers did not sign the new terms, including opening ruble accounts with Russian banks. “If these payments are not made, we will consider that the buyer has not fulfilled his obligations, with all the consequent consequences,” Putin said. His proposal sparked gas prices and raised fears that it could be a prelude to a major cut in Russian gas supplies to Europe. The German government on Wednesday issued an early warning of an energy emergency, the first step towards authorizing the government to impose a gas bill on the industry to save homes and hospitals. 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 intense pressure from Western sanctions. Economists say the changeover to the ruble would provide little support for the Russian currency’s exchange rate, as gas exporter Gazprom has to sell 80 percent of its profits in foreign currency for rubles. 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 energy supplies and to see who breaks first. “ Speaking shortly after Putin’s announcement, German Chancellor Olaf Soltz said that gas contracts provide for payment mainly in euros and sometimes in dollars. He said he had made it clear to Putin by telephone on Wednesday that “this will remain the case”. “His ideas on how this can happen are something we will now look at carefully,” Soltz told reporters in Berlin. “But in any case, what applies to companies is that they want and will be able to pay in euros.” Putin announced last week that Russia would require “unfriendly” countries to pay for gas only in Russian currency, instructing the central bank to work out a procedure for buyers to acquire rubles in Russia. The Group of Seven major economies, including Italy and Germany, rejected the demand. Ahead of the announcement of the decree, Italian Prime Minister Mario Draghi said on Thursday that he had received assurances from Putin that Europe should not pay in rubles and downplayed fears that Moscow would cut off supplies. Draghi said Putin told him during a 40-minute telephone conversation on Wednesday afternoon that “existing contracts remain in force … European companies will continue to pay in dollars and euros.” Draghi said he referred the debate to how it would work to experts and that the analysis was ongoing “to understand what it means”, including whether European companies can continue to pay as expected, if that means anything to ongoing sanctions “. “It’s a feeling from the beginning that it’s not quite easy to change the payment currency without breaking contracts,” Draghi said. The finance ministers of France and Germany also said after the meeting in Berlin that the agreements could not simply be amended and that they would consider what Putin had proposed. Meanwhile, Draghi also told the foreign press that Europe was pushing for a cap on gas prices with Russia, saying that its payments were financing the war in Ukraine and that the prices Europe was paying were not in line. with the world market. “We – Germany and Italy, along with other importers of gas, coal, grain, corn – are financing the war. There is no doubt,” Draghi said. “For this reason, Italy, along with other countries, is pushing for a cap on the price of gas. There is no real reason why the price of gas is so high for Europeans.” Draghi noted that Russia has no other market for its gas, giving Europe room for maneuver. Asked about the danger of Russia responding by closing the taps, Draghi said, “No, there is no danger.” The prospect of continued gas supplies in exchange for euros has been met with a cautious reception by German industry. “It’s good news, at least in the short term, because Russian gas supplies can not be replaced in the short term,” Achim Dercks of the Association of German Chambers of Commerce and Industry told RBB24 Inforadio. He noted that companies are concerned that any cuts will have a significant impact on the industry, “but ultimately this will have serious financial consequences for all of us.” —— D’Emilio contributed from Rome. AP journalist Colleen Barry in Milan contributed.
