Russian President Vladimir Putin listens to Governor of the Novgorod Region Andrei Nikitin during a meeting at the Kremlin in Moscow. Russia March 22, 2022. Photo: Reuters
Russia will seek payment in roubles for gas sales from “unfriendly” countries, President Vladimir Putin said on Wednesday, sending European gas prices soaring on concerns the move would exacerbate the region’s energy crunch.
According to Reuters, European countries’ dependence on Russian gas to heat their homes and power their economies has been thrown into the spotlight since Moscow sent troops into Ukraine on Feb. 24 and the subsequent imposition of Western sanctions aimed at isolating Russia economically.
With the financial noose tightening and the European Union split on whether to sanction Russia’s energy sector, Putin hit back with a clear message: If you want our gas, buy our currency.
“Russia will continue, of course, to supply natural gas in accordance with volumes and prices … fixed in previously concluded contracts,” Putin said at a televised meeting with top government ministers.
“The changes will only affect the currency of payment, which will be changed to Russian roubles,” he said.
Russian gas accounts for some 40% of Europe’s total consumption and EU gas imports from Russia have fluctuated between 200 million to 800 million euros ($880 million) a day so far this year.
The possibility that a change of currency could throw that trade into disarray sent some European wholesale gas prices up to 30% higher on Wednesday.
British and Dutch wholesale gas prices had jumped by Wednesday’s close.
The Russian rouble briefly leapt to a three-week high past 95 against the dollar and, despite paring some gains, stayed well below 100 after the shock announcement.
The currency is down around 20% since Feb. 24.
“At face value this appears to be an attempt to prop up the Ruble by compelling gas buyers to buy the previously free-falling currency in order to pay,” said Vinicius Romano, senior analyst at consultancy Rystad Energy.
Putin said the government and central bank had one week to come up with a solution on how to move these operations into the Russian currency and that gas giant Gazprom would be ordered to make the corresponding changes to gas contracts.
Writing by Muzha Kucha