Russia insists on getting paid for gas in rouble
The West imposed sanctions on Russia after it launched an invasion of Ukraine on 24 February. Putin on Wednesday fired the first major salvo of Moscow’s response to what the Kremlin casts as a declaration of economic war against the world’s biggest nuclear power.
Putin said that Russia, which supplies 40% of Europe’s gas, would expect payment for natural gas in roubles.
The request is also a potential headache for Gazprom, the world’s biggest natural gas company by reserves.
“There is an instruction to Gazprom from the president of the Russian Federation to accept payments in roubles,” Reuters cited Kremlin spokesperson Dmitry Peskov as telling reporters today.
Peskov said that Gazprom, a company so powerful in Russia that it is considered to be “a state within a state”, had four days left to work out a system for rouble payment.
“This information will be brought to the purchasers of Gazprom products,” added Peskov.
This 'reminder' comes on the back of announcements by European Union member states and gas companies that they are not willing to switch current euro and US dollar payments into rouble. Belgium's Prime Minister Alexander de Croo, for instance, said that if Putin wants rouble, the price will have to change too, as the current prices are completely detached from reality.
It doesn’t make sense to deliver our goods to the EU or U.S. and receive payments in dollars or euros,
Putin said in the meeting with government officials on Wednesday.
In response, the rouble rose on the Moscow Exchange.
Russia will continue, of course, to supply natural gas in accordance with volumes and prices ... fixed in previously concluded contracts.
Russia, he said, would “start” with gas. Payments, Putin said, would be moved to roubles in the very shortest time.
The mechanism by which up to $880 million a day in Russian gas exports will be paid for in roubles is still unclear. Euros account for 58% of Gazprom exports with dollars accounting for 39% and sterling around 3%.
Meanwhile, information from Russia's senior leadership has emerged that they would even accept payment for gas in bitcoin, which has boosted the digital currency's exchange rate.
But it seems that it is not only Europe that is getting "squeezed" by Russia, but also India, because on Friday Reuters learned that the largest Indian gas transit company (GAI India) has also been "asked" by the Russians to start paying for raw materials in euros instead of dollars.
The state-run Indian firm is still examining the request, Sources familiar with the matter told the news agency.
"GAIL doesn't see any problem in settling payment in euros as European countries are paying for their imports in euros," said one of the sources.
The sources said that sanctions might not hit payments in euros because GAIL's contract is with a Singapore unit of Gazprom.
GAIL has a long-term gas import deal with Gazprom Marketing & Trading Singapore to annually buy 2.5 million tonnes of liquefied natural gas and has been settling trade with Gazprom in dollars.
GAIL, which imports and distributes gas, also operates India's largest gas pipeline network.
With all these growing risks to European energy supplies, Brussels has already told Putin that the time for Russian blackmail is over, and today an important gas transport agreement with the United States has been concluded.
And the Germans - the biggest users of Russian gas, coal and oil - have announced that they are managing to cut Russian energy imports surprisingly quickly, with coal and oil imports expected to be lowered to zero this year and gas imports to be phased out within two years. There is no formal German state ban behind this, but in the current situation a series of German companies see it better to cancel their Russian energy import contracts.
Cover photo: Kerem Uzel/Bloomberg via Getty Images
