President Vladimir Putin has stated that Russia will begin requiring “unfriendly countries” to pay for their natural gas supplies in rubles, including all European Union member states.
Putin’s March 23 announcement comes as Russia begins to feel the effects of severe international sanctions imposed in response to its invasion of Ukraine, particularly in the local currency.
During his discussion with the government, Putin stated that Russia will implement the reforms and stop making payments in “compromised” currencies within one week. He didn’t clarify whether the decision will have an impact on oil supplies.
The only thing that will change is the payment currency, which will be changed to Russian roubles for a list of nations that have imposed sanctions.
Following the announcement, wholesale gas prices in the UK climbed. By 13:54 GMT, the British price for day-ahead delivery had risen by 18% to 259.50 pence per therm, while the winter 2022 price had risen by 11% to 264.01 pence per therm.
Putin said the government and central bank had one week to come up with a plan to convert these operations to Russian currency, and that Gazprom would be required to make the necessary revisions to gas contracts.
Contractual changes may lead European customers to have to renegotiate their agreements, which are mostly conducted in euros, 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.
The decision is also likely to bolster the Russian ruble, which, despite generally trading around 80 to the dollar, dropped to a record low of 120 to the dollar this month following the invasion of Ukraine.
The United States, European Union member states, the United Kingdom, Japan, Canada, Norway, Singapore, South Korea, Switzerland, and Ukraine are among the countries on the list of “unfriendly” countries. Deals with companies and individuals from such nations, among other things, must be approved by a government commission.
In a televised address on Wednesday, Putin stated that Russia needs to stop the use of “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.
As of January 27, Gazprom reported that 58 percent of its natural gas sales to Europe and other nations were settled in euros. Meanwhile, Russia’s close ally, Kazakhstan, has already said it will use Russian rubles for the payment of customs fees in bilateral trade.
Source: dailymail.co.uk
