On Thursday, Russian President Vladimir Putin announced that he had signed a directive requiring international customers of Russian gas to pay in roubles beginning April 1, and that if these payments were not made, contracts would be terminated.
"They must create rouble accounts with Russian banks in order to purchase Russian natural gas." Payments for gas deliveries will be made from these accounts beginning tomorrow," Putin declared on national television.If these payments are not made, we shall consider the buyers to be in default, with all of the ramifications it entails. Nobody sells anything to us for free, and we're not going to do charity either — existing contracts will be terminated."
Energy is the most powerful weapon at Putin's disposal as he tries to counter sweeping Western sanctions over his invasion of Ukraine. Russia supplies nearly a third of Europe's gas, therefore it is the most powerful lever at his disposal.His decision to impose rouble payments strengthened the Russian ruble, which had fallen to historic lows following the February 24 invasion but had subsequently rebounded.
The decision has been slammed by Western businesses and governments as a violation of existing contracts in euros or dollars. According to France's economy minister, France and Germany are preparing for a scenario in which Russian gas flows are disrupted, plunging Europe into a full-fledged energy crisis.
Buyers would deposit foreign cash to a special account at a Russian bank, which would subsequently send roubles back to the foreign buyer to pay for the gas, according to a Putin-signed decree.He stated that the switch was made to reinforce Russia's sovereignty and that the country will fulfill all of its contractual responsibilities.
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