Following unprecedented sanctions over Ukraine, Russian President Vladimir Putin warned on Wednesday that Russia will only accept payments in rubles for gas deliveries to “unfriendly countries,” which includes all EU members.
The ruble, which has plunged since the start of the Ukraine conflict, strengthened against the dollar and euro immediately following his announcement, while gas prices increased.
During a televised government meeting, Putin said, “I have decided to adopt a set of actions to convert payment for our gas deliveries to unfriendly countries into Russian rubles.”
Russia, on the other hand, will continue to supply the volume of gas specified in its contracts, he said.
Putin has given Russia’s central bank a week to execute the new payment system, stating that it must be “transparent” and entail the purchase of rubles on the domestic market.
Putin also hinted at the possibility of other Russian products being harmed.
Later Wednesday, the Russian space agency Roscosmos declared that it, too, will demand ruble payments from its international partners.
The official Tass news agency quoted Roscosmos chairman Dmitry Rogozin as saying, “We will also conclude all our external deals in rubles.”
“It is evident to us that delivering our goods to the European Union and the United States and receiving dollars, euros, and other currencies no longer makes sense,” Putin stated.
Ukraine slammed Russia’s “economic war” on the EU and efforts to “strengthen the ruble” right away.
“However, the West might impose an oil embargo on Russia, which would sink the Russian economy,” Ukrainian presidential advisor Andriy Yermak stated on Telegram.
“This is now a major economic struggle that the West must win as a whole,” he continued.
Sanctions that are crippling
Before the dispute, Germany imported 55 percent of its natural gas from Russia, according to German Economy Minister Robert Habeck, who said Putin’s demand constituted a breach of contract that Berlin will examine with European allies.
Despite the announcement, Austria’s OMV energy business announced Wednesday that it will continue to pay for Russian gas in euros.
“We have no other legal foundation for this deal. Otherwise, I wouldn’t be able to do it “According to Austrian television, OMV CEO Alfred Stern.
Since Russia’s military entered Ukraine, Western countries have imposed severe sanctions on it.
The West froze $300 billion in Russian foreign currency reserves, which Foreign Minister Sergei Lavrov branded as “stealing” on Wednesday.
However, while the US has blocked the purchase of Russian oil and gas, the EU, which got over 40% of its gas supply from Russia in 2021, has continued to accept deliveries from Moscow.
Brussels, on the other hand, has set a goal of halving Russian gas imports by the end of the year and is considering an oil embargo.
“Russia is now attempting to impose counter-sanctions on the West in order to minimize its reliance on foreign currencies,” Swissquote senior analyst Ipek Ozkardeskaya told AFP.
‘It was a historic decision,’ says the author.
Since the implementation of Western sanctions following its annexation of Crimea from Ukraine in 2014, Russia has been working to “de-dollarize” its economy.
Gazprom, Russia’s state-owned energy corporation, claimed in March 2019 that it had sold its first gas for rubles to an unnamed western European company.
The transition to trade in the national currency, according to Deputy Prime Minister Alexander Novak, will “improve reliability.”
He warned that a complete ban on Russian oil and gas would result in the global energy markets collapsing and “unpredictable” price rises.
‘Surprise your opponents’
However, BlueBay Asset Management analyst Timothy Ash said it was “hard to see Putin’s decision as ruble positive.”
Putin is attempting to compel Western countries to trade with Russia’s central bank, which they have sanctioned, according to Ash.
He went on to say, “It will merely hasten diversification away from Russian energy.”
According to investment firm Locko Invest, the nations Russia has designated as “unfriendly” account for more than 70% of Russia’s energy export earnings.
The organization also warned that Gazprom could run out of foreign currency in the future and be unable to pay its debts.
“Putin obviously knows how to build and utilize leverage,” Carnegie Foundation’s Andrew Weiss said.
“In such situations, Putin has a history of using escalation to destabilize his adversaries’ best-laid plans. There’s no reason to believe that hasn’t changed “On Twitter, Weiss stated.