On Thursday, Russian President Vladimir Putin announced that he had signed a regulation requiring international customers of Russian gas to pay in roubles beginning April 1, and that contracts would be terminated if these payments were not made.
“They must open rouble accounts in Russian banks in order to purchase Russian natural gas. Payments for gas deliveries will be made from these accounts beginning tomorrow “Putin stated in a televised address.
“If such payments are not made, we shall consider the buyers to have defaulted, with all the implications that entails. Nobody sells us anything for free, and we are not going to do charity – current contracts will be terminated.”
Energy is the most potent lever at Putin’s disposal as he tries to retaliate against sweeping Western sanctions for his invasion of Ukraine, as Russia supplies approximately a third of Europe’s gas.
His move to impose rouble payments strengthened the Russian currency, which had fallen to historic lows following the invasion on February 24 but had subsequently rebounded.
The decision has been slammed by Western businesses and governments as a violation of current contracts, which are denominated in euros or dollars. According to France’s economy minister, France and Germany are preparing for a scenario in which Russian gas flows are blocked, plunging Europe into a full-fledged energy crisis.
Buyers would deposit foreign cash to a special account at a Russian bank, which would then send roubles back to the foreign buyer to pay for the gas, according to an order signed by Putin.
He stated that the switch was made to bolster Russia’s sovereignty and that the country will honor all contracts.