Germany and France are preparing for Russian gas supplies to dry up after President Vladimir Putin announced that EU purchases must be made in rubles starting from 1 April. Berlin has already warned that Europe would not be "blackmailed" by Moscow.
Putin on Thursday warned "unfriendly" countries, including all EU members, would be cut off from Russian gas unless they opened Russian bank accounts in rubles to pay for deliveries.
"If such payments are not made, we will consider this a breach of obligations on the part of our buyers with all the ensuing consequences," Putin said during a televised government meeting.
Germany and France rejected Vladimir Putin's demand that foreign purchasers of Russian gas pay in rubles as an unacceptable breach of contract, adding that the manoeuver amounted to "blackmail".
Rejection
Germany Economy Minister Robert Habeck said that Germany was prepared for all scenarios, including a stoppage of Russian gas flows to Europe.
"It is important for us not to give a signal that we will be blackmailed by Putin."
French Finance Minister Bruno Le Maire said that both nations rejected Russia’s demand and were "preparing" for the possibility that Russia would halt deliveries.
On a visit to Berlin, Le Maire said both nations were "preparing" for the possibility "there is no longer any Russian gas".
While the United States banned the import of Russian oil and gas, the European Union – which has received around 40 percent of its gas supplies from Russia in 2021 – has retained deliveries from Moscow.
According to the decree, all payments would be handled by Russia's Gazprombank, a subsidiary of state energy giant Gazprom.
Buyers will transfer payments into a Gazprombank account in foreign currency, which the bank will then convert into rubles and transfer into the buyer's ruble account.
Sanctions
Western countries have piled crippling sanctions on Moscow since its invasion of Ukraine, including the freezing of its 300 billion dollar (271 billion euros) of foreign currency reserves.
US State Department spokesperson Ned Price said that Putin's demand for payment in rubles was a sign of Moscow's economic and financial "desperation" caused by Western sanctions.
Putin spokesman Dmitry Peskov said the new payment method would not affect the price of deliveries stipulated in contracts. "Those who receive Russian gas ... they just acquire roubles for the amount in currency which is stipulated in the gas contract," he told reporters.
German Chancellor Olaf Scholz said Thursday that Western countries would continue paying for Russian gas in euros or dollars, as previously stipulated.
"We looked at the contracts for the gas deliveries," Scholz told reporters in Berlin.
"They say that payments are made in euros, sometimes in dollars ... and I made clear in my conversation with the Russian president that that will remain the case," he said, referring to a telephone call with Putin on Wednesday.
Imports drop
While the EU refrained from an energy embargo against Russia, the bloc announced plans to slash imports of Russian gas by two-thirds this year.
Although payments for gas in rubles would allow Russia to support its national currency, it would also deprive Moscow of a source of foreign currency. The Kremlin has also hinted that it may seek payments in rubles for other exports too.
Russia has already obliged its exporters, including Gazprom, to convert 80 percent of their revenue into rubles.
According to Russia's Central Bank, its reserves – including the frozen $300 billion – decreased between 18 February and 25 March from $643.2 to $604.4 billion (from 581 to 546 billion euros).
(with AFP)
