Russian President Vladimir Putin on Wednesday announced that Moscow will no longer accept the dollar or euro as payment from “unfriendly states” for its natural gas. He emphasised that his decision to only accept payment in the ruble comes in retaliation to a barrage of Western economic sanctions that have frozen billions of dollars worth of foreign assets.
During a meeting with top government officials, President Putin made it clear that Russia will continue its supply in accordance with the volumes and prices set in existing contracts, highlighting, “The changes will only affect the currency of payment, which will be changed to Russian rubles.” Putin justified his move by saying: “It doesn’t make sense to deliver our goods to the European Union (EU) or the United States (US) and receive payments in dollars or euros.”
#Russia plans to demand #ruble payments for natural gas purchases from European nations, deepening its standoff w/west and potentially aggravating Europe’s worst energy crunch since the 1970s. European gas prices surged >30% after the news. https://t.co/RElFpNzIYE pic.twitter.com/9BEx780xft
— Holger Zschaepitz (@Schuldensuehner) March 23, 2022
Earlier this month, the Kremlin designated a number of countries as “unfriendly” to Russia over their individual or collective imposition of sanctions on Moscow over the ongoing war in Ukraine. The list includes Ukraine, the US, Canada, all of the EU states, the United Kingdom (UK), Australia, Japan, South Korea, Switzerland, and New Zealand. Even Taiwan was included in the list, emphasising that it is self-governed but a part of China. While Putin did not specify all the countries that will be forced to make gas payments in the ruble, it is assumed that most of the countries on the earlier blacklist will also be on the new one.
Following Putin’s announcement, the ruble regained some value against the dollar, reaching its highest value since the Ukraine invasion began on February 24. Nevertheless, the ruble is still down more than 22% compared to the dollar. The announcement also resulted in wholesale gas prices skyrocketing by up to 30% in some parts of Europe, with the UK and the Netherlands being particularly hard-hit.
Watch: President Vladimir #Putin says #Russia will only accept payments in rubles for gas deliveries to “unfriendly countries.”https://t.co/f9ayDfuj7E pic.twitter.com/HrOIppELoH
— Al Arabiya English (@AlArabiya_Eng) March 23, 2022
The Russian leader pointed out that his directives will be carried out by state-owned oil and gas company Gazprom, which supplies 40% of Europe’s natural gas needs, making it a crucial player in the European energy market. Moreover, Europe nearly pays a daily gas bill of anywhere between €200 million and €800 million ($880 million) in Euros or dollars.
Germany has agreed to a long-term liquified natural gas supply deal with Qatar, with Germany's economy minister saying, 'we might still need Russian gas this year, but not in the future'.
— The Spectator Index (@spectatorindex) March 21, 2022
Germany’s Vice-Chancellor and the Minister for Economic Affairs and Climate Action, Robert Habeck, slammed Putin’s decision, calling it a “breach of the contract,” and added that Berlin will convene with its European allies to discuss a response. Moscow supplies 55% of Berlin’s natural gas requirements, making Germany heavily reliant on Russia for its energy needs. Recently, German Chancellor Olaf Scholz faced criticism for not imposing sanctions on Russian energy, in response to which Scholz warned that such a move could send Germany and Europe into recession.
Pres. Putin demanded that "unfriendly" states must pay for Russian gas in rubles. Like night follows day, the ruble closed on the strong side — at 96.46 RUB/USD. The ruble has now strengthened against the USD by ~83.8% since hitting its all-time low of 177.26 RUB/USD on Mar 7. pic.twitter.com/NkYA6cHBcG
— Steve Hanke (@steve_hanke) March 24, 2022
Furthermore, Putin’s move comes against the backdrop of decreasing quantities of Russian gas deliveries through the Yamal and the Nord Stream 1 pipelines. However, according to Russia’s state-owned news agency RIA Novosti, Russian gas transits to Europe via Ukraine are still operating at maximum capacity.
Meanwhile, during his address to French lawmakers, Ukrainian President Volodymyr Zelensky called out prominent French companies—including Renault, Auchan, and Leroy Merlin—to “stop sponsoring the Russian war machine” and cease their operations in Russia.
Following Putin’s announcement
— Richard Medhurst (@richimedhurst) March 23, 2022
— The ruble is now at its strongest point against the dollar and euro since March 2nd, after plummeting due to sweeping U.S./EU sanctions
— Benchmark European gas prices rose as much as 21% in Amsterdam