Business & Economy

Putin demands rubles for Russian gas but exchange to occur after payment

(Update 1: Adds details throughout, re-ledes, alters headline)

Moscow, Mar 31 (EFE).- Vladimir Putin on Thursday warned that buyers of Russian gas from ‘unfriendly’ nations must pay in rubles under a new mechanism but in practice those countries will continue to pay in euros, which will later be converted to the Russian currency via the country’s energy-linked Gazprombank.

“We are offering these countries a clear and transparent mechanism: to buy natural gas from Russia, they must open accounts in rubles in Russian banks. The purchase of gas supplies will be done through these accounts from tomorrow,” Putin said Thursday.

All European Union countries fall under the Kremlin’s designation as ‘unfriendly’ due to the raft of sanctions leveled at Moscow in response to Russia’s invasion of Ukraine, as do others like the United Kingdom, the United States, Canada and Australia.

“If such payments are not made, we will consider this a failure to honor the commitments by buyers with all the consequences, we don’t get anything free of charge and we are not going to engage in charity either, therefore the contracts will be stopped,” Putin said.

“The situation in which the financial system of the Western countries is weaponized, when companies from those countries refuse to honor their contracts with companies and individuals, when euro accounts are frozen, it makes no sense to use those countries’ currencies,” he added.

Around 40% of the EU’s gas supply comes from Russia, although the bloc has pledged to wean itself off Russian fossil fuels in the wake of the invasion.

However, Putin’s harsh warnings came with a “compromise,” meaning that countries will continue to pay for Russian gas in the currency agreed in the contract before it is converted to rubles on the Moscow exchange, MICEX, and deposited into recipient accounts.

A slew of major Russian banks currently face Western sanctions, but Gazprombank was purposefully left out to avoid disruptions in fuel supply.

German officials on Thursday reiterated their stance that the country would not pay for Russian gas in rubles.

“It’s important for us that we don’t give the signal that we’re going to let Putin blackmail us,” finance minister Robert Habeck said following a meeting with his French counterpart.

“We are well prepared for everything that Putin decides,” he said, adding that Gazprombank was not affected by sanctions, unlike the Russian central bank.


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