Vladimir Putin announced last month that if “unfriendly countries” wanted to continue buying Russian natural gas, they would have to pay in rubles starting April 1. It seems not everyone believed he was serious. Would Russia really turn away profit by refusing payment in other currencies? Apparently so.
Many media outlets are calling the move a ‘weaponization’ of the gas supply, though clearly Russia may set its own terms and do as it pleases with its own natural resources, even if that means refusing to sell them.
Paying for gas using Russia’s currency could constitute a violation of European trade sanctions if done directly, though no one seems entirely certain whether there is a workaround. One possible way around the sanctions was thought to be for buyers to open a ruble account with Gazprombank, where they deposit euros or dollars that are in turn converted into the Russian currency for payment to Gazprom, the Russian state-owned gas giant. Although various media sources are reporting that some European countries have already carried out such payments, an EU spokesperson warned the mere act of opening a ruble account may itself be a sanctions violation. There is apparently some confusion.
An emergency meeting has been called for next week to attempt to clarify the rules of engagement. Meanwhile, two countries that have failed to comply with Russia’s required payment method have been cut off. Russia shut off the supply of natural gas to Bulgaria and Poland on Wednesday, and the Kremlin threatened to do the same to other countries.
Europe will apparently be hit quite hard by the Kremlin’s payment terms, according to energy import statistics from the EU’s Eurostat 2021 Key figures on Europe publication. (PDF)
A Canadian publication also reported in March that Russia is looking to widen the list of its exports requiring ruble payment, including grain, metals, fertilizer, coal and timber exports.