Putin wants the European Union to pay for gas in rubles

Will the ruble be saved by Europe? Vladimir Putin is going to force countries applying economic sanctions against Russia to pay for its gas in rubles, and no longer in euros or dollars.

“I have taken the decision to implement a set of measures to switch to payment in rubles for our gas delivered to hostile countries, and to renounce in all regulations the currencies that have been compromised,” said the Russian president during of a government meeting, explaining that it was a reaction to the freezing of Russian assets in the West because of its offensive in Ukraine.

The ruble rises against the euro and the dollar

Putin has asked the central bank and the government to establish “within a week” the new system which must be “clear, transparent” and involves “the acquisition of rubles on the Russian exchange market”. This announcement had an immediate effect on the Russian currency, which strengthened against the euro and the dollar, whereas it had collapsed on February 24 and the entry of Russian forces into Ukraine.

He also hinted that other Russian exports would be affected, as the West froze some $300 billion in Russian reserves held abroad, a move Russian Foreign Minister Sergei Lavrov called a “theft” on Wednesday.

“It is clear that delivering our goods to the EU, the United States, and receiving dollars, euros, other currencies, no longer makes sense to us,” Vladimir Putin said. For now, Russian hydrocarbons have been largely spared heavy Western sanctions against Russia. If Washington has decreed an embargo on Russian gas and oil, the latter continue to flow to Europe, very dependent on Russian hydrocarbons and the first market for Moscow. The European Union is now also considering an embargo on Russian oil.

“Rising prices can be unpredictable”

Several decisive international summits are expected which suggest new Western sanctions. Moscow, for its part, has been advocating for years the dedollarization of its economy, in order to reduce its vulnerability to sanctions. In March 2019, the Russian public gas giant Gazprom announced its first sale of gas in rubles to a European company.

“It is absolutely obvious that without Russian hydrocarbons, if sanctions are imposed, the gas and oil markets will collapse. The rise in the prices of energy resources can be unpredictable,” said Alexandre Novak, Deputy Prime Minister in charge of Energy, on Wednesday.