Belgium, (Brussels Morning Newspaper) Russian President Vladimir Putin announced on Wednesday that the country will charge “unfriendly countries” for natural gas in roubles.
The move caused natural gas prices in Europe to spike over concerns that it would exacerbate the energy crisis, Reuters reported.
The EU’s dependence on Russian energy has been highlighted ever since the war in Ukraine started and Western sanctions began targeting the Russian economy. EU member states disagree about whether to impose sanctions on the Russian energy sector.
“Russia will continue, of course, to supply natural gas in accordance with volumes and prices… fixed in previously concluded contracts”, Putin stressed, adding that “the changes will only affect the currency of payment, which will be changed to Russian roubles.”
Dependency on Russian gas
The EU covers roughly 40% of its natural gas needs with Russian imports, which have run at between 200 million and 800 million euro per day this year.
Since the announcement was made, some wholesale gas prices in Europe spiked by as much as 30% on Wednesday. The rouble recovered slightly, but remains roughly 20% down compared to where it was at when the war started.
Putin says the Russian authorities plan to implement the decision in one week’s time and that the Gazprom energy giant will make the required changes to agreements.
According to Gazprom, approximately 58% of its natural gas exports since 27 January were paid in euro, about 39% in US dollars and roughly 3% in British pounds.
Leon Izbicki, natural gas analyst at the Energy Aspects energy research consultancy, pointed out that the current sanctions do not “prohibit payments of Russian gas in roubles.”
However, he declared that “it is unclear how easy it would be for European clients to switch their payments to roubles given the scale of these purchases.”
The Central Bank of Russia could provide the foreign exchange markets with additional solvency, Izbicki suggested, which would help clients from Europe source sufficient roubles for their purchases.
A senior Polish government source warned that the move “would constitute a breach to payment rules included in the current contracts”, adding that Poland does not plan to sign new agreements with Gazprom after the current one expires at the end of 2022.