Putin declares that Russia will only accept roubles as payment for gas from ‘unfriendly’ countries in retaliation for sanctions

  • Russia to demand roubles for gas payment from states which imposed sanctions
  • Vladimir Putin said he made the decision as sanctions ‘destroyed Moscow’s trust’
  • States include US, EU member states, UK, Japan, Ukraine, South Korea, Norway
  • The move could lead to renegotiation of contracts, leading to supply disruptions
  • It could also boost the Russian currency which tumbled after launching invasion 

Vladimir Putin has declared that Russia will only accept roubles as payment for gas from ‘unfriendly’ countries in retaliation for sanctions imposed over his invasion of Ukraine.   

‘Russia will continue, of course, to supply natural gas in accordance with volumes and prices… fixed in previously concluded contracts,’ Putin said, adding that sanctions had ‘destroyed Moscow’s trust’. 

‘The changes will only affect the currency of payment, which will be changed to Russian roubles’ for a list of countries, corresponding to those that have imposed sanctions.

Putin said the government and central bank had one week to come up with a solution on how to move these operations to the Russian currency and that gas giant Gazprom would be ordered to make the corresponding changes to gas contracts.

Contractual changes may mean European customers have to renegotiate their agreements, which are mostly in euros, possibly leading to supply disruptions as talks take place. 

But with a host of European countries still dependent on Moscow for most of their gas and oil supplies, disruptions would push up prices and deepen the continent-wide energy crisis. 

British and Dutch wholesale gas prices leapt on Wednesday following the announcement, while the European Union proposed legislation on minimum gas storage levels. 

The move is also expected to boost the Russian currency which fell to a record low of 120 to the dollar this month following the invasion of Ukraine, despite usually trading around 80 to the dollar. 

The list of ‘unfriendly’ countries includes the United States, European Union member states, Britain, Japan, Canada, Norway, Singapore, South Korea, Switzerland and Ukraine. Among other things, deals with companies and individuals from those countries have to be approved by a government commission.

Vladimir Putin has declared that Russia will only accept roubles as payment for gas from ‘unfriendly’ countries in retaliation for sanctions imposed over his invasion of Ukraine

A host of European countries are still dependent on Moscow for most of their gas and oil supplies (pictured, a plant in Tartarstan, Russia). Russian gas accounts for some 40 per cent of Europe’s total gas consumption

Putin, speaking in a televised address on Wednesday, said Russia needs to stop using ‘compromised currencies’. 

‘It’s pretty clear that it makes no sense for us to supply our goods to the European Union, to the US and receive payments in dollars, euros, other currencies,’ he said. 

According to Gazprom, 58 per cent of its sales of natural gas to Europe and other countries as of January 27 were settled in euros. 

US dollars accounted for about 39 per cent of gross sales and sterling around three per cent. Russian gas accounts for some 40 per cent of Europe’s total gas consumption.

‘An understandable and transparent procedure of making payments should be created for [all foreign buyers], including acquiring Russian roubles on our domestic currency market,’ Putin said.  

Wholesale gas prices in the UK and the Netherlands rose following the announcement, with the British price for day-ahead delivery jumping by 18 per cent to 259.50 pence per therm by 13:54 GMT, while the winter 2022 price rose by 11 per cent to 264.01 p/therm.

In the Dutch gas market, the front-month contract was 15 per cent higher at 114.00 euros per megawatt hour (MWh) while the Q2 price jumped by 16 per cent to 113.65 euros/MWh.     

 

A Ukrainian soldier stands next to a Russian armoured vehicle that was captured during fighting near Makariv, which is now back under Kyiv’s control

An apartment building after a rocket strike, amid Russia’s invasion of Ukraine, in Kramatorsk, Donetsk Oblast, Ukraine on March 18

Photographer Evgeniy Maloletka stands amid rubble of an airstrike on Pryazovskyi State Technical University

Separately, the European Commission proposed legislation requiring EU countries to fill their gas storage to at least 90 per cent by November 1 each year from 2023, and 80 per cent this year.

That move will need approval from EU countries and the European Parliament and traders said the target will be tough to meet even in periods when demand is lower.

In the European carbon market, the benchmark contract was 3.4 per cent lower at 77.90 euros a tonne. 

European countries’ dependence on Russian gas and other exports has been thrown into the spotlight since Russia sent tens of thousands of troops into Ukraine on February 24. 

Ukrainian forces have mounted stiff resistance to Russia’s actions and the West has imposed sweeping sanctions on Russia in an effort to force it to withdraw its forces.  

Meanwhile the Russian rouble briefly leapt to a three-week high past 95 against the dollar on Wednesday in Moscow, before settling close to 100, after Putin’s announcement. 

By 13:13 GMT, the rouble was 3.4 per cent stronger against the dollar at 100.02, earlier clipping 94.9875, its strongest since March 2. It had gained 3.5 per cent to trade at 110.50 versus the euro.

The rouble had stabilised near 105 to the dollar in recent sessions after falling to a record low of 120 in Moscow this month and even further on the interbank market to 150. Before that, the rouble traded at about 80 to the dollar.

The European Commission on Wednesday proposed legislation requiring EU countries to fill their gas storage to at least 90 per cent by November 1 each year from 2023, and 80 per cent this year (pictured, pro-Ukrainian protesters gather otherwise the Commission buildings in Brussels on March 22)

Ukrainian forces have mounted stiff resistance to Russia’s actions and the West has imposed sweeping sanctions on Russia in an effort to force it to withdraw its forces 

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