President Vladimir Putin has stated that Russia will seek payment in rubles for gas shipments to “unfriendly” countries, sending European gas prices skyrocketing amid fears that the move will deepen the region’s energy crisis.
Since Moscow’s invasion of Ukraine on February 24, and the accompanying imposition of Western sanctions aimed at economically isolating Russia, European countries’ reliance on Russian gas and other commodities has been brought into the focus.
Putin’s action demonstrated a growing willingness on both sides to use the Russian energy supply as a weapon in the conflict between Moscow and the West over Ukraine.
Putin could be aiming to prop up the ruble and replenish foreign currency holdings in Moscow to compensate for sanctioned reserves elsewhere by forcing payments in rubles.
What is Putin saying
Putin said at a televised meeting with top government ministers, “Russia will continue, of course, to supply natural gas in accordance with volumes and prices … fixed in previously concluded contracts.”
He added, “The changes will only affect the currency of payment, which will be changed to Russian rubles
“I have taken a decision to switch to ruble payments for our natural gas supplies to the so-called hostile states.”
The measure applied to the country’s deemed “hostile” include the US, the U.K. and all members of the European Union.
What you should know
Russian gas contributes to over 40% of Europe’s total consumption, with daily imports from Russia ranging from 200 million to 800 million euros ($880 million) so far this year.
On Wednesday, certain European and British wholesale gas prices rose by 15-20% as a result of the likelihood that a change in currency would throw that transaction into turmoil.
After the stunning revelation, the Russian ruble momentarily soared to a three-week high above 95 versus the dollar before settling near 100.
As of January 27, Gazprom reported that 58% of its natural gas sales to Europe and other nations were settled in euros. The dollar accounted for around 39% of all sales, while sterling contributed for about 3%.
The European Commission has stated that it intends to reduce the EU’s reliance on Russian gas by two-thirds this year and eliminate it “far before 2030.”
Russia compiled a list of “unfriendly” nations, which corresponds to those that have imposed sanctions. Deals with companies and individuals from such nations, among other things, must be approved by a government commission.
The United Nations, European Union member states, the United Kingdom, Japan, Canada, Norway, Singapore, South Korea, Switzerland, and Ukraine are among the countries on the list.
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